Creating Competitive Environment for Airport Infrastructure

15 Mar 2013

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Stella Oduah, Aviation Minister

While private investment in infrastructural development in the aviation sector has not been so successful, it has jolted government into action to revamp airport facilities. Chinedu Eze reports
The Managing Director of the Federal Airports Authority of Nigeria (FAAN), Mr. George Uriesi, exuded confidence on Monday when he spoke about what the agency was doing to rehabilitate the airports infrastructure around the country. He spoke with a sense of accomplishment and chest beating.

Then he forayed into an attack against those who in the past used the back door to obtain concession agreements and vowed that such questionable process would not happen again.
It was at the opening ceremony of a highbrow restaurant, Things Remembered, at the new General Aviation Terminal (GAT), Murtala Muhammed International Airport, Lagos.

He described the new terminal as the busiest domestic terminal in Nigeria and booed those who criticised the terminal some time ago, explaining that due to the urgency of moving passengers from tents that served as a temporary terminal while the GAT was under construction, the work was not finished before it was put into use. But now the terminal was almost finished, the quality of work was not in doubt, he cued.

Uriesi’s panegyrics was not lost on those who are familiar with the controversy surrounding GAT and the claim of Bi Courtney Limited that it also owned the area where the facility was built, as well as the Lagos airport domestic terminal, known as MMA2. Uriesi was obliquely comparing MMA2 and the new GAT, saying that when work is completed on the terminal it would be facilitating four million passengers per annum.

The zealousness and determination that prompted the Federal Government to embark on building the terminal and to remodel other terminals in the country was inspired by sense of competition, as the edifice, MMA2 stands out as a private sector effort, receiving all the commendations and accolades from airport users.

It took the Federal Government over 30 years to be aroused from its lethargy and complacency; from its incompetence and corruption to start a massive work of remodelling the nation’s airport terminals, many of which had become obsolete and constitute a safety and security threat. This was also made possible because a woman who has been very successful in private business was appointed to be the minister of the industry. Another thing that made it possible is that the woman has the clout to weave through bureaucratic bottlenecks, which served as barbed wire which the top civil service personnel use to obstruct progress in the ministries, especially when the appointed ministers are willing to be accomplices.

So, in a way what Bi Courtney Limited accomplished at MMA2 has gingered the Federal Government into action. But credit must go to Stella Oduah, who kick-started the transformation of airport facilities in the country. Before her and after the unveiling of MMA2, there were aviation ministers, from Mr. Felix Hyat, to Mr. Babatunde Omotoba and to Mrs. Fidelia Njeze.
Before she clocked one year in office Oduah had inaugurated the Lagos GAT, and then followed by GAT at the Nnamdi Azikiwe International Airport, Abuja and just last weekend the airport terminal in Benin City was unveiled. There are other airport facilities that have already been remodelled that are awaiting to be launched, including the Kano airport terminals, the one in Enugu, Owerri, Jos, Yola, and Port Harcourt.

But many Nigerians believe that government should not be spending money on providing airport infrastructure; that the private sector could partner government to build airport facilities. The MMA2 is a good example that this could be achieved, but the concession was mired in controversy because of the way it was secured and that trait followed other concessions that were carried out by FAAN.

An industry critic and former head of Nigerian Cabin Crew Association, Olumide Ohunayo, once brought to the fore the undulating accomplishments of privatised airport infrastructure in different countries of the world and observed that it was not entirely a successful story, but when government cannot provide airport infrastructure, it runs to the private sector for help.

The private sector providing airport facilities has its implication: after investing huge resources, the investor has to recoup his investment and also make profits to justify the investment.
The International Air Transport Association (IATA) is inclined to seeing airport infrastructure as part of the social responsibility of government, which it must provide as a platform to economic development of that country through air transport, which is the fastest means of moving the important people whose activities are critical to the economy of any nation.

So the private sector may not be a solution to provision of airport facilities, especially in Nigeria which is at this low stage of aviation growth. A few examples can suffice. When Bi Courtney Limited completed MMA2 because of the huge resources the company invested in the project and because of the facilities it got from banks with a projection of when it would be completed, the company introduced outrageous charges to the airlines and the shops rentage was also very high.

The credit facilities it secured from the banks with projections of when they would be repaid and the targeted revenue defined the agreements that facilitated the loans. But this was not to be because the charges that would have brought in the projected revenue were termed outrageous by the airlines and, in defiance to the agreement reached before the project was built, not all domestic scheduled operations took place at the new terminal.

It took the intervention of the Airline Operators of Nigeria (AON) and the Nigeria Civil Aviation Authority (NCAA) for Bi Courtney to review the charges downwards. The airlines had protested that they were not making profits, so how could they pay such high charges.
Now, if air transport is seen as a vehicle of economic growth of a nation, fares should be made relatively low so that many people can travel by air.

The way Nigerian situation is, air travel is still seen as elitist as about 12 million out of 160 million people travel by air. In the domestic destinations, only about eight million out of that population travel by air. Then if airlines were made to pay high charges they would transfer these high charges to the passengers and this will multiply the fares and lock out many who otherwise would have been travelling by air. So in a way airport infrastructure should be part of the social amenities that government should provide for its citizenry.

Security expert and former head of the Murtala Muhammed International Airport, Lagos, Group Captain John Ojikutu (rtd), has said variously that government should concentrate on providing safety critical equipment and leave the building of airport terminals and ancillary facilities to the private sector, but the failed concessions in the industry have shown that it is not as simple as that and again, if government does not earmark these funds and actually use the resources to provide these infrastructure, what will it use the funds for?

As Oduah noted during the commissioning of the Benin airport terminal last weekend, the public sector must show accountability by carrying out some of these projects and at the same time partner with the private sector, in a way that the private sector should be seen as complementing the efforts of the public sector at this level of Nigeria’s development.
But the snag there is that government agencies lack initiative. They are ridden with corruption and suffer from inertia and this explains why the airport facility built in 1979 was not expanded, rehabilitated or another terminal built in more than 30 years. That Oduah was able to break that jinx of inertia could not been seen as a common occurrence and it is this reality that should prompt government to adopt it as policy that the private sector should be fully involved in airport development in order to at least keep the public sector on its toes.

Oduah insisted that with the necessary enablement that the public sector could effectively carry out lofty projects, just as much as the private sector.
“Government believes in the private sector but also believes that the public sector can do great things and they have been doing great things. It has to be collaboration of efforts between public and private sector. The public sector given enabling environment can do very well,” the Minister said.
Before Oduah was appointed the Minister of Aviation, many in the industry could not have believed that 11 airports in the country could be rehabilitated under two years.

In fact, a well-known operator in the industry once said that if he were asked to rehabilitate the airports he would first take up two airports to work and after that “If I am not sacked by then I will take another two airports, but this Minister took 11 airports and while contending with our doubts she has almost completed work on these airports because work in the least of them is past 70 per cent completion.”

“So when she said she would embark on rehabilitation of the remaining 11 airports we believe her,” the operator added.
But FAAN knows that it cannot keep the private sector away from the infrastructure development of the airports.
Uriesi said on Monday that the agency had adopted a new policy which was more stringent, transparent and accountable.

“We are doing things right now and we are doing the right thing; any deal that we strike with anybody will be done as they are done in other parts of the world. The business expectations are clear, the criteria are clear unlike in the past. We are not doing anything for a person but for Nigerians, we are not going to do anything with anybody unless we have evidence from the banks that they are funding the project and the money is there.

“From the day you sign and the day you start construction is six months. If you don’t start within that period, the thing falls away, from the day you start construction, it is 24 months, if you don’t finish after them, under normal circumstances penalty kicks in. There is no question of saying the thing has been concessioned to somebody in 1998 or so when you have not done anything; you don’t need to sign unless you have the money.”
But in the long run, the private sector is expected to be managing majority of the facilities at the airports.

Tags: Airport Infrastructure, Business, Environment, Featured, Nigeria

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