EAN Investment Teaser_Past Voluntary Work
OVERVIEW OF THE TARGET COMPANY
EAN Aviation was established in 2006 and is the first full service FBO (Fixed Based Operator) in West Africa.
Its operations are based in Lagos, with annexed stations in Abuja and Port Harcourt. For over 10 years, it has
been the one-stop shop for business jet operators in Nigeria and has focused on providing quality service,
reliability and safety for its customers at price points that make the support services for business travel more
affordable and accessible to its customers. EANs services generally include:
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FBO services - This covers Flight Planning; Ground Power Supply; In-Flight / Out-Flight Catering and
Hospitality Services; and Dispatch Services.
Maintenance services - The EAN Aviation workshop is fully equipped for maintenance of SAFT
batteries and aircraft wheels across a range of aircrafts.
Aircraft Sales and Charter - The firm provides advisory services to its clients during business jet
purchases, and also facilitates aircraft charter availability for clients who are either interested in
commercial operations of their personal aircrafts or seeking to rent business jets.
Leased and Serviced Offices - Rents office spaces to aviation industry operators seeking to newly setup shop within the local market.
Through this fund raising initiative, EAN is positioning itself to expand into the commercial aviation market.
Based on its vast experience and successful track record in Nigeria, it will be approaching its expansion into
commercial aviation from a more strategic angle. In the short term, it will focus on the key infrastructural and
ground support service and cost elements of the commercial aviation business with a view to developing the
scope, scale and sustainability to ultimately support the operations of an airline, thereby making it
sustainable and profitable in the long term.
Diagram 1.0 - EAN Operational Base
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INDUSTRY OVERVIEW
Aviation is one of the single most transformative industries in the world, connecting people, goods and
businesses safely, securely and speedily over the past 100 years. According to the Air Transport Action Group
(ATAG), in 2014 aviation carried 3.3 billion passengers and generated about US$2.7 trillion worth of global
GDP, while providing 62.7 million jobs worldwide. Africa's aviation sector is one that is yet to find its feet, but
with a population of over a billion people, a burgeoning economy and poor rail and road infrastructure the
indicators for growth are promising. As such, aviation is a necessity to support Africa’s socio-economic
development through connectivity across the continent.
While aviation has grown and made significant strides globally through technological advancements,
innovation and supportive regulatory regimes, the African aviation industry has had a chequered history,
marred by unsuccessful airlines, high costs, a lack of adequate connectivity and in many cases non-supportive
regulation and policies. Consequently, the region accounted for the lowest rate of global passenger traffic as
well as the smallest share of global aviation GDP in 2014 (see diagram 1.1 below). But despite such
performance, there are success stories in this space proving that aviation in Africa can be viable, sustainable
and profitable.
Diagram 1.1; Source: ATAG, Aviation Benefits Beyond Borders Report, 2016
Apart from the issues outlined above, one of the impediments to successful airline businesses in Africa is the
airline business model itself. Most airlines start out by buying aircraft and then building, developing or
acquiring all the elements to run the airline around those aircraft, in other words, maintenance of the fleet,
crewing of the fleet, fuelling, training, catering and so on. This model is particularly susceptible to external
shocks and price fluctuations; therefore, it makes the profitability of an airline business vulnerable and
volatile.
Within the West African sub-region, Nigeria is amongst the leading markets in aviation as it is open to various
international carriers frequenting its skies. In recent years, Nigeria’s domestic and foreign passenger traffic
has risen steadily at an average of 10% per annum with the Murtala Muhammed International Airport
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(MMIA), which serves as the nation's gateway (in Lagos), accounting for over 60% of the total passenger and
aircraft movement within the economy.1
The notable successes experienced in the local aviation industry, so far, have been supported by an
increasing inflow of passengers and aircrafts driven not just by private-sector profit motives but also by an
increased government focus on the sector. This is proven by airport remodelling projects executed by the
past administration, as well as the current government’s desire to concession the airports. Additionally, with
Nigeria’s current focus on economic diversification as well as addressing its recession within the mediumterm, opportunities are abound in the aviation sector that contributed N138 billion to local growth as of
2015.2
The focus of this teaser will be on the ideas proposed by the project company on how to sustainably and
profitably run an aviation and airline business based in West Africa, for the purpose of servicing African
aviation businesses and airlines using a different business model.
STRATEGIC AREAS OF FOCUS
The strategic focus of the project company is to disrupt the business model norms for the commercial
aviation business by taking a modular approach to the various major cost elements to running an airline and
investing in each of these value chains. The goal is to make each module, of this innovative business model,
self-sustaining and profitable business units in their own right and provide the respective services to other
aviation businesses who need it with the ultimate goal of establishing an airline which will benefit from the
economies of scope and scale derived from each of these self-sustaining units servicing the airline.
Maintenance, Repair and Overhaul (MRO) Market
In 2015, the global MRO market was worth US$67.1 billion and has been forecasted to reach US$100.3 billion
by 2025 at an average growth rate of 4.1% per annum, with Africa’s MRO growth potentially reaching
US$12.8 billion.3 Such growth will cover line maintenance, heavy maintenance, engine maintenance and
components; with the strongest drivers of MRO growth being engine maintenance and components while the
cost of airframe heavy maintenance is to improve due to innovative technology.
The key trends to watch in the market are fleet demographics, evolving supplier relationships and surplus
parts. New technology aircraft is set to replace older aircraft at a considerable pace in the coming years with
significant implications for MRO suppliers and airline customers. It will be essential for airlines in Africa and
elsewhere to ensure that they achieve cost-effective technical purchasing and efficient supply chain
management.4
With Asia and Africa set to potentially have the highest population growth rates by 2025, there will be a
significant shift in the regional demand of MRO services over the decade ahead. As such, these regions will be
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Nigerian Civil Aviation Authority (NCAA)
Guardian Newspaper, Article, May 2015
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Oliver Wyman, "Turbulence Ahead: Disengage the Autopilot" Presentation, October 2015
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Safat Aviation Group
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challenged to build necessary infrastructure capable of handling the volume of MRO services their
inhabitants and visitors will demand.
Diagram 1.2; Source: Oliver Wyman, "Turbulence Ahead Disengage the Autopilot" Presentation
Aircraft maintenance represents 15% to 25% of the operating cost of airlines flying West Africa’s skies; while
C and D checks are conducted in MRO facilities in Europe, Asia or North America. A regional aircraft MRO
facility will greatly reduce the cost and delay airlines incur in having to send their aircraft to maintenance
centres in Europe or America as well as reduce the taxes they have to pay on imported aircraft parts.
Training and Simulation Market
Flight simulation is an important factor in professional flight training for commercial pilots and can be used in
initial and recurrent training as well as proficiency / annual checks of flight crew personnel that are mandated
by international regulators and standard operational procedures of aircraft operators. It is also important for
enhancing flight skill competency and situational awareness, all of which contribute to the safety of flight
operations and handling of aircrafts.
According to Visiongain, Africa had a 1.7% market share of the civil aviation training and simulation industry
as at 2013, which was forecasted to increase to just about 1.73% by 2023. However, global sales of civil
aviation training and simulation products were also forecasted to increase (at an average growth of 3.4%)
from US$501 million to US$702 million between 2013 and 2023. While African market sales of training and
simulation products will increase at a faster average growth rate of 3.7% from US$90 million to US$135
million.
Fuelling Services Market
The fall in global oil prices within the last two years has had positive implications for the African aviation
sector, as fuel costs were previously reported as the major challenge in the airline cost structure in Africa
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with percentages of up to 40%.5 Based on the current global economy, marginal routes by African airlines are
becoming profitable and this could change the economics of the industry with smaller benefits over time.
Market research analysts at Technavio have predicted that the global aviation fuel market will grow steadily
at an average of over 3% by 2020. This is certain as annual increases in the number of aircrafts and
passengers will lead to an increased demand for aviation fuel; thereby enabling the commercial application
market segment to dominate the entire industry by 2020 while accounting for about 73% of the total share of
the market.
Based on the global objective to reduce carbon emissions, more developed economies are also now investing
in bio-fuels that will be used by aircrafts. However, due to the long gestation period for returns, the
investments have been primarily short-term in nature. Since, bio-fuels are still not commercially available at a
competitive price, there is no bulk purchase by airlines.
KEY INVESTMENT HIGHLIGHTS
Innovative Modular End-to-End Aviation Business Model
Building on its successful track record of running an FBO in Nigeria over the past 11 years, the project
company aims to expand from its current status as a Fixed Based Operator into a full-fledged commercial
aviation business with several critical stand alone and self-sustaining units. The plan is to approach this end
to end process in phases. Phase 1 will focus on a Maintenance Repair and Overhaul Facility (MRO) that will
support both business and commercial aviation. Phase 2 will focus on a Training and Simulation facility that
will either form part of the MRO or will be a stand-alone independent facility. Phase 3 will focus on an
Aircraft and Spares Sale and Leasing Company, while Phases 4 and 5 will focus on Fuelling and Catering
respectively. The objective is that each of these elements will be developed in phases and established
towards profitability in accordance with projected timelines, market dynamics and consumer appetite.
Strong Partnerships and Affiliations with Global Aviation Brands
Each of these elements of the plan will focus on key synergistic relationships with credible global aviation
brands to provide support and market pull for overall self-sustainability as independent business units. These
partnerships and affiliations will help ensure global recognition and adherence to international standards and
best practices (certifications, accreditations, franchising, spares and tools support etc).
Highly Qualified and Experienced Management Team
Current management has already run a successful business as an FBO. Through this initiative and funding
drive, also showcases its visionary and innovative approach to doing business, whilst recognizing the need for
the right support and structures; and the prudent modular approach helps provide a natural hedge against
over-exposure.
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Juliet Indetie, Winners and Losers in the Decline of Oil Prices, 2016
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