Air Nigeria as national carrier
For Air Nigeria, the airline mooted as our new national carrier to set off on its feet, Nigeria’s Federal Government will be paying N3.168 billion or $8.8 million as startup capital. This was contained in the Outline Business Case document recently presented to the Federal Executive Council. It was presented by the Infrastructure Concession Regulatory Commission (ICRC). Since then, airline operators have been expressing concerns over government funding of the airline which will result in interference in its operations as a private company.
We gathered the injection of N3.2 billion is a part payment of government’s five per cent equity share in the company, whose take off fund is N108 billion. Sources at the Federal Ministry of Transportation said $300 million is the minimum expected from its public and private investors, of which $15 million is Federal Government’s contribution. Sources explain that the government wishes to start the project in order to attract credible investors. Air Nigeria’s predecessor, Nigeria Airways was liquidated in 2004. With Nigeria’s immense oil wealth at the time, Nigeria Airways failed woefully, rolling up billion of naira in multiple debts.
From its ashes rose many private airlines, majority of which closed shop as soon as they were launched. In the 1980s, Nigeria Airways had more than 30 aircraft, of different ranges. It covered major Nigerian, African and world cities. It flew its Boeing 727 and 737 jets to Kano where it positioned the Fokker F27 that would redistribute passengers to Sokoto, Kaduna and Jos twice daily. While there were direct flights to Yola and Maiduguri from Lagos once daily. A 50 seater F27 flight connects Lagos to Ibadan and Benin daily. For Eastern Nigeria, it serviced Enugu, Port Harcourt and Calabar with F28 crafts at least twice daily.
On its international menu, Nigeria Airways had a retinue of crafts for the West Coast of Africa, New York, London, Frankfurt, Amsterdam, Rome, Jedda, Nairobi among others. Unlike private airlines, Nigeria Airways had most of its maintenance done locally then. An engineer with the defunct airline, Ayuba Kyari recalled that the Lagos hangar conducted checks on Boeing 737 airlines and Airbus A310. In keeping with his election promise, President Buhari caused the name and logo of the moot carrier to be unveiled the Farnborough Air Show in London last July ahead of December 24, 2018 takeoff.
In 2016, Federal Government launched the Aviation roadmap, an ambitious plan to revive the Nigeria Airways. Spearheading the campaign is the Minister of State for Aviation, Hadi Sirika, a captain and technocrat. The new airline is subject to the approval of the government via the public private partnership. Unlike the federally owned Nigeria Airways, Air Nigeria will be 95 per cent privately owned. Government is only providing start-up capital in the form of an upfront grant or viability funding.
In order for the airline to take off in earnest, government is providing $55 million as grant to pay commitment fees to enable it obtain an aircraft on lease for initial operations. The grant will also provide deposit for new aircraft whose delivery will begin in 2021. Minister Sirika also added that the core investor will only be known after the public private partnership procurement is completed. The company’s shares will be sold via an Initial Public Offer (IPO) with Federal Government holding five per cent equity held in trust for Nigerians.
The list of shareholders will be available to the Security and Exchange Commission and the Nigerian Stock Exchange. Finally, Air Nigeria will be sold to the public subject to the relevant rules for public companies. However, nowadays, government ownership of airlines is unfashionable, because of the high capital, high risk and the meagre turnover in airline business today. Although, public private partnership (PPP) prides itself on trust and the sanctity of agreements among parties, going by controversies surrounding PPP in Nigeria, it will be difficult for investors to trust the government. A case in point is the failure of the PPP arrangement between Bi-Courtney Aviation Services Limited (BASL) and the Federal Airport Authority of Nigeria (FAAN) on the build, operate and transfer (BOT) agreement on the Murtala Airport2. The terminal has been the subject of litigation between the duo since its completion.
While FAAN concessioned the terminal to BASL for 15 years; BASL petitioned for a 36-year extension and obtained it from President Umaru Yar Adua. But FAAN insisted the initial 15 year agreement was sacrosanct. Amidst that imbroglio, FAAN awarded Lagos General Aviation Terminal to a rival company in contravention of the original agreement with BASL. When BASL went to court, it won up to the Court of Appeal which FAAN didn’t appeal. Sadly, there was another subsisting judgment of N132 billion in favour of BASL obtained in 2012 over FAAN’s illegal operation of Lagos terminal.
Up till the moment FAAN has not obeyed the courts. Subsequently, aviation stakeholders doubt Sirika’s sincerity and the sincerity of any subsequent government honouring concession agreements. Another stumbling block is the inability of government to settle the entitlements of the workers of the defunct Nigeria Airways. Former President Obasanjo liquidated the Nigeria Airways without paying compensation to its workers. While the law establishing the failed airline had not been repealed, the severance packages of more than 6000 workers remained unpaid contrary to labour laws.
Indeed, assets of Nigeria Airways spread all over the world had been sold and the hangar at the Murtala Muhammed Airport is still littered with equipment that are not being put to use. Which is why aviation stakeholders insist government should first settle ex-workers before a new carrier is embarked upon. The chairman of Airline Operators of Nigeria, Nogie Meggison noted that the problem of aviation isn’t that of capacity, but that of infrastructure deficit and the tough operational environment. Meggison averred that those problems should be tackled first.
The high mortality rate of airlines should be cause for worry. According to the Nigerian Civil Aviation Authority, no fewer than 150 airlines were registered by 2000. Less than ten are now operating while the others have been impounded over debt through its assets recovery vehicle: the Asset Management Corporation of Nigeria. And experts on aviation advice that government should tackle infrastructure before embarking on a new national carrier. They claim maintenance as soul of aviation should be done locally instead of going overseas every 18 months gulping more $3 million per session.
Furthermore, Meggison identified matters requiring government intervention to include a review of five per cent Ticket Sales Charge to a flat rate in line with global best practices. He also called for a harmonisation of over 35 charges which add to the huge burden of airlines. All of these problems go to show that the effort to revive the national carrier is more political than for prosperity reasons. Another aviation consultant, Taiwo Adenekan, was of the view that government should make a Fly Nigeria Law. Take Julius Berger for instance, they have millions of contracts in this country. They have flying budget for their workers. What percentage of such budget goes to our national carrier? Government should use law to protect Nigeria Air in terms of patronage and the spirit of nationalism.
Therefore, government should tackle infrastructure and aviation law before dreaming of a national airline. Government must pay $12 million owed Nigeria Airways for unpaid services before closure. Government must settle ex-workers and repeal Airways Act before building a new national carrier.
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