REVIEW… NIGERIA AIR: How not to make the same mistake

It is no longer news that the Nigerian government has unveiled the new national carrier, Nigeria Air, about fifteen years after the defunct Nigeria Airways wounded-up operations.

The unveiled plan for Nigeria Air, which is expected to have a tail design featuring an eagle-like swirl in green and white, has a logo embellished with a livery of the national flag with the slogan, “Bringing Nigeria closer to the world.”

With so much ado while unveiling the plan for the new carrier, one would think every necessary measure needed for takeoff of its operations has been sorted. However, while a lot has been done to attract investors for the business, a lot more is still required to forestall a reoccurrence of liquidation of the nation’s national carrier.

Nigeria, Africa’s most populous nation, is no doubt the largest economy in the continent, and it is often referred to as the “Giant of Africa” owing to the country’s large market size and its potential to drive Africa’s economy.

Last week, the International Monetary Fund (IMF) reviewed its growth projection for Sub-Saharan Africa’s economy to 3.8 percent in 2019 from 3.7 percent it forecast in April, 2018. The global monetary authority said the growth from 2.8 percent recorded in 2017 “reflects improved prospects for Nigeria’s economy” supported by the rise in commodity prices.

For a country like Nigeria with so much potentials, it would be imagined it should have a national carrier dominating the continent’s skies and leveraging aviation sector to further drive growth. But, due to management flaws, the country has relinquished its leadership position to carriers like Kenyan Airways, South African Airlines, Air Macros, Air Namibia and Ethiopian Airline, the only consistently profitable carrier in Africa, serving about 70 global cities across Africa from its hub in Addis Ababa with a fleet of over 100 aircraft.

In the face of the present-day realities in Nigeria’s aviation sector by operators of private-owned airlines, making air travels for Nigerians challenging, the need for government’s intervention through creation of a robust national carrier to provide effective service delivery and affordable airline transportation for Nigerians, which would in turn improve the economy of the nation, cannot be over emphasized.

A cursory look at the modalities of operation of Nigeria Air as disclosed by the Federal Government and the controversies surrounding the defunct flag carriers would enable anyone form an informed opinion of what might likely happen to the new airline.

Nigerian government’s plan for Nigeria Air

According to the Minister of State for Aviation, Hadi Sirika, the new national airline would be “private sector-led and driven through Public Private Partnership (PPP) arrangement,” with the government owning not more than five percent equity and zero interference.

“It is a business, not a social service. Government will not be involved in running it or deciding who runs it. The investors will have full responsibility for this,” he said.

These statements including equity stakes of 5 percent and 95 percent in the PPP arrangement between the government and the investors respectively signal influence from both parties, implying a possible nullification of the entire process and the Outline Business Case (OBC) Certificate of Compliance for the establishment of the airline issued by Infrastructure Concession Regulatory Commission (ICRC) stipulating zero government interference.

“This certificate is granted on the condition that the Federal Government demonstrates her commitment to leverage private sector capital and expertise towards the establishment of the National Carrier through the provision of an upfront grant/Viability Gap Funding (VGF) to fund aircraft acquisition/start-up capital. The FGN also agrees to zero contribution to airline management decisions and zero management control by the government. Any attempt to impose government control over the management of the Airline invalidates this certificate and the entire process.

“In view of the fact that the mitigating conditions for the project may change over time, this Certificate is valid for 12 months from the date indicated below. This certificate is therefore issued to enable the Ministry commence an international open competitive bidding process to procure a world-class strategic investor to manage, operate, maintain, and invest in the National Carrier,” ICRC stated.

The OBC certificate of compliance specified that government should inject $8.8 million in viability gap funding and the upfront grant required to leverage private sector investment going forward. It also specified $300 million capital injection in three years by the operators of the national carrier for sustainability.

The minister had assured that in spite of government’s $8.8 million pre start-up fund, the management and business decisions of the carrier would be 100 percent determined by the private sector managers, who will emerge core investors through competitive bidding process.

Nigeria government taking the lead, while OBC stipulates ‘zero interference’

While the government was making efforts to ensure it provides good platform for the business to thrive through engagements with relevant stakeholders in the aviation sector and interactions with willing investors, it could be inferred that its activities so far show some level of interference.

This is based on some key decisions the government has taken to ensure the airline becomes a reality. Among the decisions is the procurement of 15 leased aircraft, according to Bloomberg, for the commencement of operations of the airline.

The government decided investors’ equity stakes, flight routes to about 80 destinations of which half of them would cover international and another for local, regional and sub-regional, fleet size of the about 30 aircraft in five years has been pre-planned by the government, among others.

An airline which is expected to be of immense contribution to the economy, began the early days of its life driving revenues of foreign expertise. With countless number of Nigerian youths who have developed great technology and branding skills, the design contract for the emblem of the airline was outsourced to a firm based in Bahrain, FROM6 Communications.

The branding company expressed its delight over the new airline project, it said, “In conjunction with Nigerian marketing agency Image & Time and Airline Management Group (AMG) Transaction Advisors for the new National Flag Carrier, FROM6 is very proud to showcase their most recent Airline branding project, Nigeria Air. Nigeria’s new flag carrier which was unveiled at Farnborough International Airshow this week.”

With this development, the “Buy Naija to Grow the Naira” narrative has just been jettisoned. How would Nigerian youths regain confidence that the airline means well for them? If at infancy, the government got the idea of the name from them and disregarded them in awarding of the branding contract for the airline. This could be viewed as a contradiction of government’s claim that it would engage the Nigerian youth.

This goes to show the concerns being raised over Nigeria Air are not unconnected to those that led to the liquidation of old national carriers.

How previous attempts failed

The former Nigeria’s flag-carrier, Nigeria Airways, which was established in 1958, was liquidated in 2003 and thereafter, it was succeeded by Air Nigeria, originally Virgin Nigeria Airways and later Nigerian Eagle Airlines, in 2004.

The airline came into being about six decades ago under the name West African Airways Corporation Nigeria Limited (WAAC Nigeria) after the dissolution of West African Airways Corporation (WACA), an airline jointly owned by the four west Africa colonies of the government of Britain.

In 1961, Nigeria became the sole owner of the company, which eventually became the flag carrier of the country with supervision from relevant ministries.

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Years after, corruption, mismanagement, overstaffing, introduction of some policies by the International Monetary Fund (IMF) and frivolities, where government officials, military, civil servants used its services at will for operations and pilgrimage without payment, led to the gradual downfall of the government-owned airline.

Unfortunately, some assets of the company were subsequently impounded owing to huge debt stock occasioned by higher expenditure compared with revenue generated, making the company disengage some of its staff repeatedly and raise its fares significantly.

Arik Air took over some of the assets from Nigeria Airways and began operation three years after it was liquidated.
Private operator, Arik Air, was later taken over by Asset Management Corporation of Nigeria (AMCON) last year, leading to the suspension of long-haul flights.

Air Nigeria, a joint venture between Nigerian investors and Richard Branson’s Virgin Group, emerged after the government sealed an agreement with Virgin Atlantic Airways to fund the airline. But, just like Nigeria Airways, Air Nigeria ceased to operate in 2012.

The emergence, reemergence and renaming of airlines made the nation to record about ten failed attempts prior to this moment including; Nigerian Global, Nigerian Eagle, Virgin Nigeria, Nigerian One, among others.

In fact, the conditions of operation of Nigeria One unveiled by former President Goodluck Jonathan in 2013 were similar to Nigeria Air, the carrier was in its final approval stage according to former aviation minister, Stellah Oduah. The Director of Airport Operations at FAAN, Henry Omeogu, stated that 30 new aircraft would be acquired for Nigeria One just like the government had planned for Nigeria Air.

Ex-Workers of Nigeria Airways want emoluments paid

Up till this moment, the final severance package of about 800 ex-workers of Nigeria Airways and the outstanding obligations to local contractors are yet to be paid as President Muhammadu Buhari has not approved the payment of the terminal benefits.

The debts owed to the former staff and the contractual obligations to local contractors between 2006 and 2015 would be paid through the issuance of promissory note and bond, according to Finance Minister Kemi Adeosun. The total amount of the package is put at N45 billion.

As a result of this, some of the former workers have lost their lives, while those alive are wallowing in abject poverty due to the negligence of the government in paying their entitlements. In fact, the National Union of Air Transport Employees (NUATE) threatened that, should the government fail to pay the final severance package of the staff, the aviation union would ensure that the plan to commence the new carrier would not come to fruition.

Challenges facing existing airlines in the country

Some domestic airline operators in the country have begun to express their reactions over the new national carrier. Chief Executive Officer of Air Peace, Allen Onyema, while speaking at the 22nd Annual Seminar and Award of the League of Airports and Aviation Correspondents in Lagos urged the government not to frustrate existing airlines, stressing that all privileges given to the national carrier should be extended to other airlines as a level playing field remains critical to the sustenance of an effective aviation sector.

On his part, Managing Director, Topbrass Airlines, Capt. Roland Ajayi, said the policies adopted for operating existing national carrier were a disservice to the survival of private carriers despite the huge investment. He maintained that the Airline Operators of Nigeria (AON) needed to sit with the aviation minister to straighten the rough edges to enable a win-win for existing private sector carriers and the new national carrier.

“The government through the Asset Management Corporation of Nigeria (AMCON) already owns Aero and Arik airlines implying three airlines under the ownership of the government which has not happened in any country before.

“I am suggesting that the government should adopt the model adopted for aviation in Singapore and United Arab Emirates for the industry to make progress,” said Nick Fadugba, Chairman, African Business Aircraft Association, while canvassing for partnership among carriers as a recipe for survival.

Nigeria’s aviation sector, which is majorly dominated by private airlines, have been facing some challenges lately, an issues if not looked into that might always affect the operations of the new national carrier which is expected to be run by some private investors.

Most of the operators of existing airline have continued to cry out on the need to perform routine maintenance on their aircraft at the Maintenance, Repair and Overhaul (MRO) organization overseas, even as the pressure on dollar in the foreign exchange window is still high. “Air Transport in Nigeria is dollar denominated and the non-availability of the foreign exchange is not helping the situation,” said the Chief Executive Officer of Medview Airline, Muneer Bankole.

The CBN had created a special window for the sector to allow airline operators perform these transactions, but the window could not solve the problem owing to the large volume of transactions performed, making the operators call for a review of the window to make foreign exchange readily available to them. This, according to Bankole, would determine the availability of aviation fuel.

The non-compliance to aviation rules by airlines, which include establishing MRO facilities in the country, also form part of the major problems facing the existing airline, this leaves some of the airlines to conduct maintenance on the aircraft at will, the Chairman, Airline Operators of Nigeria, Capt. Nogie Meggison, said, “Government needs to come out with a clear policy to support or to sponsor an MRO. We need to build a maintenance facility and we need to come out with a clear policy on training schools.”

Presently, most Nigerian airports are lacking modern landing aids, which include airfield lighting and Instrument Landing System (ILS). Although, the federal government said it was in the process of concessioning airport facilities, some industry experts say that it is the responsibility of the government to provide safety critical equipment at the airside of the airports.

Should these challenges remain unresolved, Nigeria Air, when launched in December 2018, would begin its operation in an environment shrouded with myriads of problems bedeviling the optimum performance of airlines, undermining its ability to compete favorably with other national carriers in the African region.

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