Endless fireworks over Nigeria Air
The Nigeria Air project, for the establishment of a national carrier, has been one of the earliest programmes of this administration yet it seems with each passing that it may not be realised before the end of its tenure. This is in spite of the assurance by President Muhammadu Buhari who spoke for the first […]
Senator Hadi Sirika, Aviation Minister
The Nigeria Air project, for the establishment of a national carrier, has been one of the earliest programmes of this administration yet it seems with each passing that it may not be realised before the end of its tenure.
This is in spite of the assurance by President Muhammadu Buhari who spoke for the first time last week on Nigeria Air. He said the project is 91 per cent completed and that it would commence operations by December.
This was also coming after the Minister of Aviation, Senator Hadi Sirika, who has been driving the project, unveiled Ethiopian Airlines as the preferred bidder and the equity partner for the airline.
However, since the minister unveiled the shareholding structure giving 49 per cent to Ethiopian Airlines; 46 per cent to Nigerian private investors (SAHCO, MRS and other institutional investors) and 5 per cent to the federal government, there seems to be an unending controversy over the development.
Members of the National Assembly, airline operators and aviation stakeholders have questioned the rationale for the shareholding structure, which gives Ethiopian Airlines an upper hand in the management of the airline.
Chairman of the House of Representatives Committee on Aviation, Rep. Nnolim Nnaji summed up the concerns during a meeting with the minister.
“We are just concerned about the interest of Nigeria. We represent Nigeria…We are just concerned because, one, we are talking about a country, Ethiopia, which is our competitor, they are competing with us, whether we are doing well or we are not doing well, they are competing with us and we are offloading our BASA (Bilateral Air Service Agreement) with Ethiopia, that is what we are just trying to do right now.
“The traffic belongs to us, we have the traffic. That we are not doing well today does not mean we can’t do well tomorrow. The honourable minister, you are an aviator, we believe that you can do better than this. We cannot offload our BASA to a small country like Ethiopia and Ethiopia will be running our airline for us. They are doing international and they are coming to take the local. They will bring all the planes that they are not using to Nigeria and they will take our traffic.”
Sirika had said the ministry on June 10, 2022, received a closed bid by the Ethiopian Airlines Consortium.
He added, “Few others attempted to submit, but unfortunately could not meet the deadline. Since we did not collect the bids, we are not in a position to say who they are.”
The minister emphasised that the Ethiopian Airlines Consortium was declared the Preferred Bidder and the evaluation team will proceed with contract negotiation and other processes, which he hopes to complete by mid-November.
And as the nation awaits the take-off of the new airline as assured by the minister, not many people in the industry are convinced about the genuineness of the project and the model being adopted in picking a competitor on BASA as the equity partner.
Currently, ET owned 100 per cent by the Ethiopian government, operates in four destinations in Nigeria and currently have footprints in eight other African countries like Togo, Malawi, Mozambique and Côte D’Ivoire, among others. According to industry stakeholders, the partnership would amount to handing over the domestic operation to Ethiopian Airlines.
They also warned that Nigeria Air may suffer the fate of the defunct Virgin Nigeria set up in partnership then, with Virgin Atlantic.
Besides, other stakeholders have questioned the contributions of other equity partners like SAHCO, MRS and those behind the institutional investors that would have the 46 per cent stake in the new airline.
A member of the Airline Operators of Nigeria (AON), Capt. Roland Iyayi faulted the structure of the Nigeria Air, saying it would amount to an act of sabotage to allow Ethiopian Airlines to manage the proposed airline as it would not benefit Nigeria at the end of the day. He further asked if the new airline would be subjected to the same challenges that the domestic operators are facing.
Daily Trust reports that over the years, the domestic airlines have raised issues about the operating environment, which they said has made it difficult for airlines to thrive as they are burdened with the challenges of multiple charges, inadequate infrastructure and the skyrocketing price of aviation fuel, among others despite working hard to sustain the industry.
Iyayi, who is the CEO of TopBrass Airlines, stated that the proposed carrier would not have any value addition to the domestic market because the aircraft would be brought on wet lease with the crew from Ethiopia. “Nigerian market will be decimated and it will kill the domestic market.
“Domestic operators in Nigeria are operating in the most hostile environment you can imagine for any airline company.
“If the Nigeria Air project is subject to the same conditions as the current operators in the domestic market, it will fail. If you allow the same situation that Nigerian airlines are exposed to, Nigeria Air will fail.
“Now we need to learn from the past. We had Virgin Atlantic in Virgin Nigeria. Virgin Atlantic came in more or less in the same structure, initially providing $3 million that was put into the Central Bank. When it was time for them to operate, they got back their $3 million and brought all the aircraft, leases were made to Nigeria and the leases were beyond market value and that invariably meant we were not benefitting in any way from that structure.
“They had privileges, they had a terminal at the international airport in Lagos and they had terminals in every place they operated, which created a distortion in the market.
“Currently, the structure we are looking at with Nigeria Air, the same thing is about to happen. Terminals are being set aside as we speak for Nigeria Air.”
Aviation analyst, Group Capt. John Ojikutu reiterated that the project will create a crisis for Nigeria in the future to have an airline that already has four frequencies in Nigeria to be the technical partner to the national carrier.
He said, “What we are doing today is that we are bringing in our competitors into our own bilateral air service agreement. For me, I don’t think it will work.
“Up till 2019, I have followed the plan by the present administration to establish a national carrier until it dawned on me that the way we are going, we are going the way of establishing a government carrier rather than a national carrier.
“And I said to the minister, ‘if we cannot establish a national carrier, let us establish flag carriers from Arik and Aero that we gave over N200bn in 2012’ and we got practically nothing out of it even up till now.
“I have still not changed my mind that rather than have a national carrier with our competitors on our BASA, it will not give us any advantage at all, no matter what we try to do.
“Let us find a way within the country but we would need a foreign technical partner and that foreign technical partner must not come from any of our competitors on the BASA route.”
According to him, given the fact that Ethiopian Airlines already has four destinations, it is flying into in Nigeria, “It will cause trouble by the time we set up a national carrier. Are we going to stop the agreement we have with Ethiopian Airlines on its four destinations in this country or our own national carrier would be competing with it even though we are joined together?
Chairman of Westlink Airlines, Capt. Ibrahim Mshelia said while he is an advocate of a national carrier, which would increase job opportunities in the sector in addition to providing more travel options, there is a hidden interest in the proposed Nigeria Air.
“I would have expected to see ownership of the airline in the first place with some Nigerian airlines. We have a carrier like Air Peace, which is big enough to be able to say, ‘I will take 25 per cent’ but who are we seeing? We are seeing the ministry’s staff. These are some of the things that are begging for an answer.
“The way we are going about it is just so new, so fresh and I would simply say there is a hidden interest and so far no transparency, this project is going to suffer and it is going to add to our problem.”
Chairman of United Nigeria Airlines, Professor Obiora Okonkwo said instead of talking about a national carrier, the government should have concerned itself with providing support for the domestic operators. “It is a shame and mundane to be talking about national carriers in the contemporary global economy.” He noted that there is nothing ‘Nigerian’ in the proposed Nigeria Air.
Despite the misgivings about the project, the federal government insisted that it has taken the project through due diligence by going to the Infrastructure Concession Regulatory Commission (ICRC), which approved the Outline Business Case and confirmed that the project is in line with public procurement policy.
But will the project stand the test of time with the proposed shareholding structure? Only time will tell.