Airports concessioning: Seeking end to inefficiencies at nation’s airports

Some four years ago, the Federal Government suggested the idea of concession as the way out of the gross inefficiency and losses at airports nationwide. Aviation workers’ unions, among other stakeholders, who had given an initial nod to the move, have now turned their backs on the idea, citing some red flags. This is as the Aviation Minister, Hadi Sirika, maintained that government no longer has money to invest in aviation infrastructure. As the battle for the soul of Nigerian airports rages, WOLE OYEBADE weighs the merits and demerits of the planned private partnership, saying that the current stalemate is either fuelled by lack of transparency in the concession programme or self-centredness of the workers, or both.

The argument was the most logical. The airports, both local and international, were in deplorable states, a condition that has earned them places among some of the worst aerodromes in the world. Fixing them required a lot of money that government could no longer afford. It was time to turn the facilities over to private investors to run efficiently and profitably. The listening audience of aviation stakeholders could not agree less, and they urged the concession plan to take off immediately. That was late 2016.

Now in 2020, with the airports still stuck in the tight and unprofitable grips of the Federal Government, the aviation workers’ unions are up in arms against a planned concession that has been mooted again as the ultimate solution.

A fortnight ago, the Nigeria Labour Congress (NLC) led a coalition of aviation workers unions, including National Union of Air Transport Employees (NUATE), Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and Association of Nigeria Aviation Professional (ANAP), to embark on a nationwide protest against airport concession. They warned that it was a dress rehearsal for the showdown that will welcome further moves by the handlers of the concession programme at the Ministry of Aviation. And other stakeholders were alarmed by how an initiative once thought to be noble by the same unions had turned ugly.

Airports as assets or liabilities
THE Federal Government has and operates 22 airports, a record in Africa, but not one to envy. Findings show that at least 19 out of the 22 have emerged unviable and are operating at a loss.

Except the trio of Murtala Muhammed International Airport (MMIA), Lagos; Nnamdi Azikiwe International Airport (NAIA), Abuja; and Port Harcourt International Airport (PHIA), Rivers State, none of the other 19 airports has sufficient revenue to cover the cost of operations alone.

Investigations by The Guardian showed that additional funding from high-traffic Lagos and Abuja airports’ excess revenue to the tune of N26.1 billion had cushioned the operational cost deficits incurred by the unviable airports in 2017, 2018 and 2019.

Aviation Minister, Hadi Sirika, recently reiterated his defence for concession of the major airports in spite of protests, saying the government has no money to invest in aviation infrastructure.

Sirika explained that at stake was the concession of the terminals and not the airports as a whole, as misinterpreted by some people. He said unlike what the past administration tried to do by selling off the airports, the government’s dwindling revenue made it imperative to consider private partnership in the provision of airport infrastructure.

He observed that the Murtala Muhammed International Airport terminal that was built in 1979 for 200,000 passengers currently processes nearly eight million passengers, lamenting that the facilities had been overstretched.

“What we are trying to do is to keep assets of the people for the people. We are not trying to sell the assets of Nigerians like the last administration tried to do. What we are doing is for good service delivery. They will revert back to the people. What they are doing is to assist to provide these facilities. Government has no money to pump into airports,” Sirika said.

How not to concession
THE government had since 2017 begun moves to concession all the 22 airports, beginning with the big four in Lagos, Abuja, Port Harcourt and Kano. Coincidentally, the big four are beneficiaries of a 2013 loan deal between Nigeria and China to build four new terminals for the four airports. Abuja and Port Harcourt currently use the new terminals, while that of Lagos and Kano are work-in-progress.

Following the recent concession approval by the Infrastructure Concession Regulatory Commission (ICRC), the workers’ unions became more agitated. They requested for the details of a $500 million worth of Chinese loan deal to build the four terminals, especially the add-on plan to concession the terminals. Government’s response didn’t come their way.

The General Secretary of NUATE, Ocheme Aba, observed that there remains no clarity on the question of the semi-concession that already exists through the Chinese loan facility.

Aba said: “Equally important is the loud silence over the issue of primacy of national security, especially at this time and the foreseeable future. They failed to situate issues within the national security architecture, the potential fact of the four foremost international gateways being held in private, most likely foreign hands.

“We hasten, though, to let it be known that we are unambiguously strewn to the national cause and the genuine interest of the workers of Federal Airport Authority of Nigeria (FAAN). We are completely extricated from any narrow or selfish motives. Therefore, we shall remain unwavering in our stated commitment to deny this clandestine Public Private Partnership (PPP) the benefit of daylight.”

Technical knockout
THE unions, in a statement, alleged that the minister had usurped the responsibilities of FAAN in the concession, adding that the ICRC should have statutory deal with the airport agency, rather than with individuals.

Deputy General Secretary of ATSSAN, Francis Akinjole, said it was regrettable that FAAN had nothing to do with any project identification, prioritisation, or concept note to the ICRC, as required by the ICRC’s protocols.

“The only role FAAN has played so far is that of a representative member on the Project Delivery Team (PDT) and the Steering Committee as appointed by the Minister. Therefore, the ICRC and the Ministry, by carrying on with the airports’ concession project outside the purview of FAAN, is indicative of an unwholesome agenda. Such action is, in fact, unlawful as it contravenes Part II, 3(g) of the FAAN Establishment Act, 2004 as well as the Civil Aviation Act, 2005.

“According to the National PPP processes of the ICRC, the Transaction Advisor (TA) is to be appointed through a competitive bidding process. We all know that the only way to assure a truly competitive bidding process is through open bidding. But in the case of these airports’ concession projects, there was no such bidding exercise known to the public,” Akinjole stated.

He added that ATSSAN was aware that the PDT was at a meeting discussing the issue of TA when they learnt that the FEC had just then announced the approval of the appointment of a TA. “While we agree that the PDT is not an approving authority, we must nevertheless state that the PDT is a vital organ of the PPP process with definite functions and mandates.

“Its functions form the foundation upon which the success of the entire PPP project rests. Therefore, by circumventing the functions of the PDT as the ICRC and the Ministry have done, particularly by the clandestine appointment of Transitional Advisor (TA), there is a clear case of violation of the process as well as a travesty against the Nigerian people,” Akinjole stressed.

President of the Nigerian Labour Congress, Ayuba Wabba, on behalf of the Congress, warned the Federal Government to desist from further contemplation, discussions and arrangements to concession international airports.

“We call for social dialogue between government and labour on this. Organised labour and the entire Nigerian working class would resist any attempt to unilaterally concession any of our public airports thus undermining the directive, principles and fundamental objectives of our national constitution, which is actually the fulcrum upon which our collective identity and aspiration rests. We will not give up or surrender public assets to a few well-connected Nigerians, regardless of how powerful they may think they are,” he said.

He noted that the current concession drive of the government did not start today. “It has been part of the neo-liberal predilection of successive governments, stretching from the days of military rule up till the current democratic dispensation to privatise, deregulate, and concession critical national assets to their cronies and friends. Organised labour has identified this approach to governance as reactionary, predatory and self-serving. We rejected the concession of our core national assets yesterday. We are rejecting it today!

“The unwholesome and unpatriotic attitude of giving away our prized national property to private sector operatives is not only unjust and immoral but also in ultra-violation of Chapter 2, Section 16 of the 1999 Constitution of the Federal Republic of Nigeria on the Fundamental Objectives and the Directive Principles of State Policy which states that the Nigerian government must manage and operate the major sectors of the economy and ensure that our economy is not operated to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group.

“It is important to note that while our airports, especially the ones earmarked for concession, were in states of eye sore and dilapidation, no private sector invested money towards its rehabilitation. It would be a grand insult to the collective intelligence of the Nigerian public for the Federal Government to invest a lot of public funds into the reconstruction and rehabilitation of our airports and then hand them over to private sector players for profit maximisation and at the expense of the taxpaying public. This is unjust. It is immoral. This cannot stand,” Wabba said.

Concession with caution
THE International Air Transport Association (IATA) lately cautioned Nigeria and other countries on the verge of either privatising or concessioning airport infrastructure to be wary of models that prioritise financial gains.

IATA, the clearing house for over 290 international airlines around the world, urged governments to take a cautious approach when considering airport privatization, especially as several of such recent initiatives only succeeded in transferring additional cost to air travellers and airlines.

The airlines, at the end of the 74th Annual General Meeting (AGM) in Sydney, unanimously passed a resolution, calling on governments to prioritise the long-term economic and social benefits delivered by an effective airport ahead of the short-term financial gains provided by a poorly thought-out privatisation.

IATA’s Director General and Chief Executive Officer (CEO), Alexandre de Juniac, noted that the financial constraint is not peculiar to Nigeria, as the global industry at large is currently in an infrastructure crisis.

de Juniac said: “Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. But it is wrong to assume that the private sector has all the answers.

“Airlines have not yet experienced an airport privatisation that has fully lived up to its promised benefits over the long term. Airports are critical infrastructure. It is important that governments take a long-term view, focusing on solutions that will deliver the best economic and social benefits. Selling airport assets for a short-term cash injection to the treasury is a mistake,” he said.

According to IATA, about 14 per cent of airports globally currently have some level of privatisation. As they tend to be large hubs, they handle about 40 per cent of global traffic.

“So, we don’t accept that airport privatisation must lead to higher costs. Airports have significant market power. Effective regulation is critical to avoiding its abuse, particularly when run for profit by private sector interests,” said de Juniac who also noted that five of the top six passenger-ranked airports by Skytrax are in public hands.

IATA member airlines resolved to urge governments considering airport privatisation to focus on the long-term economic and social benefits of an effective airport; learn from our positive experiences with corporatisation, new financing models, and alternative ways of tapping private sector participation; make informed decisions on ownership and operating models to best protect consumer interests, and lock-in the benefits of competitive airport infrastructure with rigorous regulation.

de Junaic said further: “There is no one-size-fits-all solution. A broad range of ownership operating models exist that can meet a government’s strategic objectives without a transfer of control or ownership to the private sector. Globally, many of the most successful airports are operated as corporatised entities of governments.”

Reputation matters
CHAIRMAN, Bi-Courtney Aviation Services Limited (BASL), Dr. Wale Babalakin (SAN), noted that the inability of the Federal Government to honour agreements it signed with private investors was the bane of low capital inflow and underdevelopment of the sector.

Babalakin, however, expressed delight at FAAN’s decision to amicably resolve conflicts over MMA2 with BASL. He described the development as “breath of fresh air” unlike in the past when the airport authority engaged in Gestapo manner to take over MMA2.

“Only private sector can finish projects on schedule because they have the funds. If MMA2 had been allowed to go at its pace, we would have expanded and built airport terminals better than they have in Accra. We had plans to build a monorail that will link Lagos airport international terminal to the domestic terminal. We had plans to build a power plant for Lagos airport,” he said.

Former Director-General of Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, on his part, warned that nobody would invest in aviation in the country until all concession issues pending in court are resolved.

Demuren said: “We need to resolve all issues regarding policy inconsistencies that came with many of these concessions. We inherited problems with Chief Harry Akande and Dr. Wale Babalakin’s concessions and FAAN should sit down to resolve all lingering issues before we go ahead with this new exercise.”

Stakeholders, however, called on the government to make the concession exercise very transparent with a view not to replace public monopoly with private sector monopoly, but one that would truly serve the interest of Nigerians.

Concession will bring more engagements, transparency
GROUP Managing Director of Finchglow Group and Chairman of Airline and Passenger Joint Committee (APJC), Bankole Bernard, told The Guardian that people did not understand what concession was all about, otherwise, they would not be against it.

Bernard explained that concession does not mean transfer of ownership. The ownership of airports still remains in the coffers of the government, while the responsibility of managing those airports is transferred to private investors.

“When the concession is given to reputable hands, then they will deliver better service to the travellers, better service in the industry, and better service even to the regulators. For instance, the airport terminal is what most travellers or users get to see; they do not get to see how the runway works. They do not get to see the management of the navigation aids. Those are sensitive facilities that should be in the hands of the regulator because that is the backend of the entire airport.

“I will liken the union to a child. When you tell a child to stop playing rough or not to play with certain gadgets because it might be harmful, the child may not understand. So, more often than not, the unions are not well informed on the position. All they are seeing is that there is going to be layoff of workers, but not the benefits that will come to all.

“Tell me, the Murtala Muhammed Airport terminal II (MMA2) was concessioned, are there no workers there today? Are they not getting their entitlements? Are they not better paid? Concession will guarantee win-win for everybody, including the investors that have dropped the money. Now, governments’ money can be used for less viable airports nationwide. So, our viable airports should be given to the technocrats that can manage it better and make it more profitable. And the government stands to benefit at the end of the day,” Bernard said.

Aviation Security Consultant, Group Capt. John Ojikutu (rtd), urged the government not to relent in the concession plan, but should be strategic in the process.

“If you are going to concession, don’t concession only Lagos, Abuja and Port Harcourt. Whoever takes Lagos must be able to take Ilorin, Ibadan and others with it. That is what some people are saying. My position is this: whoever takes Lagos must be able to go to another geographical area, be it in the east or north to take two others along with it.

“If you do that, we are going to open up some of the airports that you called unviable to domestic routes. Because that one will go side by side with the multi-destinations that we are giving to foreign airlines at our airports. Like I used to say, no foreign airline should go to Lagos and Abuja. You either go to Lagos or Abuja. If you go to Abuja, you take two or three other airports in other geographical areas but definitely not Lagos. Ditto for Lagos. If you do that with concessionaires and airlines too, the chances are that the foreign airlines can even partner the people you are concessioning too to develop all these airports.

“In 2007, Lufthansa wanted to take over the Murtala Muhammed Airport. They said the authorities should publish it; let it be advertised so that it does not look as if they are doing some kind of bargain. They tried to do that with Lufthansa in Abuja, but they still refused. We need to be very transparent in what we are doing. For me, it is the best way to go.

“There is nothing to hide in this matter. All we want is to get good money that can be used in other social areas instead of bringing in money and tell me that you cannot concession Port Harcourt unless you build it. Babalakin built MMA2 from scratch. And you said you cannot concession Sokoto or Maiduguri airport unless you first build it? No! Concession all of them the way they are. The way they built MMA2, they will build other ones like that,” Ojikutu said.