Virgin Nigeria to be Profitable on Domestic Routes
AC100,
Surely long haul routes will bring higher yields to VNA as compared to domestic routes, however...
Your opinion that Nigerian domestic routes are unprofitable, at least the ones Virgin Nigeria intends to launch with, is totally unfounded. If routes such as Lagos-Abuja (1,500 pax daily both ways), P/Harcourt / Kano were unprofitable , independent carriers would not have focussed on these markets alone and abandoned other so-called "unviable" airports. "Nigerian factor" in business is at play here: Minimum investment, cut corners, target of overnight profit, lack of long-term vision. In fact, some of the established independent carriers have thrived for years focussing on these trunk routes.
Relatively speaking, Virgin Nigeria is 'capitalized' in comparison to typical "tokunbo" start-ups in Nigeria. The new flag carrier will introduce fuel-efficient and environment-friendly aircraft types to Nigeria, along with much awaited airline IT solutions (such as e-ticketing) which optimize operations, reduce costs, and simplify procedures which all serve to enhance profitability. Of course internet penetration is still very low in Nigeria but you've got to start somwhere.
IMHO the independents will face a monumental challenge in surviving, yet alone competing effectively. I should say I'm very surprised that the Nigerian airline sector is not witnessing consolidation as in the banking sector.
Regarding the start-up capital, VNA through its press releases made it clear that once the airline is airborne, an Initial Public Offering (IPO) will be made on NSE in order to raise further capital base necessary for expansion (routes and long-term fleet finance).
You're right that Richard Branson is looking after his own interest as well but I believe the VNA arrangement will be mutually benefitial to Nigeria as well. I think we should avoid pre-judging the outcome of Virgin's recuirtment drive, and realize that on the medium to long run, training of Nigerian flight crew on the type to be operated would have been complete and thus increasing the number of Nigerian pilots to a majority.
Finally, I don't think it's fair to label Branson a neo-colonialist out to milk Nigeria. I am not implying he should be welcomed with open arms and zero scrutiny either. So far, I think both Branson and FGN are playing their cards well.
Let's not forget that Financial Derivatives' invitation for strategic partners to invest in a new flag carrier yielded no interest from strategic investors apart from South African Airways. The 3 previous attempts to float a national airline were pathetic in both seriousness and transparency.
I believe Virgin's courageous and entrepreneurial entry to the Nigerian airline industry will usher in a new era of a reliable, modern airline industry which will only serve to attract further foreign direct investment in the country.
Rani