US embassy cable - 05LAGOS1512

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 001512 
 
SIPDIS 
 
TRANSPORTATION FOR FAA; DAKAR PLEASE PASS TO FAA REP ED 
JONES; ROME PLEASE PASS TO TSA REP JOHN HALINSKI 
 
E.O. 12958: DECL: 09/18/2015 
TAGS: EAIR, EINV, PREL, NI 
SUBJECT: VIRGIN NIGERIA RILES DOMESTIC COMPETITORS 
 
REF: A. LAGOS 1450 
 
     B. LAGOS 1415 
 
Classified By: Consul General Brian L. Browne for reasons 1.4 (D). 
 
1. (SBU) Summary.  Many Nigerian airline executives continue 
to view Virgin Nigeria (VN) as a foreign carrier, which in 
its bid to look Nigerian, receives far too much government 
support.  The other airlines contend that this alleged 
preferential treatment has made it difficult for them to 
compete on an equal basis against VN.  Notwithstanding VN's 
push to fly carriers to the U.S. (reftel), both VN 
representatives and aviation experts say that VN can be 
profitable by operating in Nigeria alone.  End Summary. 
 
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Nigerian Airline Industry Says U.S. Support 
for VN Would Have Negative Impact 
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2. (SBU) Landover Company Managing Director Edward Boyo told 
us the Government of Nigeria's (GON) selection of VN as its 
national carrier has forced complex changes on the Nigerian 
aviation industry.  He stated existing Nigerian airline 
companies feel betrayed by the GON's decision to unilaterally 
back VN without consulting them, and worse without providing 
them commensurate levels of government support.  (Note: 
Landover is an aviation services and logistics company with 
close ties to Overland Airways. End Note.) 
 
3. (C) Several airline executives we talked to groused that 
the USG should not approve VN's application for a direct U.S. 
route, saying other Nigerian airlines would see it as unfair. 
 Having attended the 11th Aviation and Allied Business 
Conference in Addis Ababa, the largest gathering of aviation 
professionals in Africa, Boyo stated other airline executives 
in attendance were "intimidated" by VN's presence in West 
Africa and did not consider VN an indigenous "African" 
company.  Richard Aisuebeogun, Overland Airways Chief 
Operating Officer, believes VN has a "tough sell" in changing 
the Nigerian aviation community's perception that VN is not 
an indigenous company. 
 
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VN Trying to Improve Its Local Image 
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4. (SBU) Aisuebeogun stated VN was trying to dispel the 
perception that it was a foreign entity through its public 
relations campaigns and by employing more Nigerians.  VN has 
graduated 23 cabin crew members from flight training, hired 
over 150 Nigerian staff, and was expected to employ 120 
Nigerian pilots by June 2006, company representatives have 
said.  VN CEO Simon Harford has forecasted an additional 
15,000 total jobs would be created directly and indirectly 
from VN's five-year company expansion plan, and they hoped to 
have 1400 full-time employees by the end of December 2005.  A 
non-voting VN executive board member said the company also 
planned to update its online advanced booking reservations 
system and introduce a bonus miles/reward program soon. 
Aviation experts and VN representatives told us VN's 
operations in Nigeria were efficiently profitable to sustain 
the airline.  While direct flights to the U.S. remained a 
company goal, its operations would not dip into the red if it 
could not achieve this goal. 
 
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Contract with Boeing in Bid for US Routes 
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5. (SBU) In pushing for their Department of Transportation 
(DOT) application to fly to the U.S., VN said it was 
encouraging U.S. airlines to enter the Nigerian market.  The 
VN non-voting executive board member told us "Nigeria does 
not want to see a monopolistic situation" and that 
"Continental should aggressively bring back their 
application" to spur competition (reftel).  He stated VN had 
finalized a contract to lease five Boeing 737 carriers by 
mid-October rather than go with Airbus because company 
executives believed leasing U.S.-made aircraft would better 
the chances of DOT approving the application for a direct 
route to the United States. 
 
6. (SBU) Comment.  VN continues to campaign hard to convince 
everyone that they are an "indigenous" carrier.  Its 
competitors have not gone for this bait.  The other airline 
companies see VN as a common threat, but have no real idea 
how to challenge VN's aggressive entry into the market.  So 
long as VN continues to receive strong GON support while 
other airline companies do not, VN promises to become, if it 
is not so already, the preeminent player in terms of service, 
aviation technology, marketing, availability of routes, and 
safety and security in the Nigerian aviation market.  End 
Comment. 
BROWNE