Waiver Granted Lufthansa May Absolve It of $14m Debt

22 Nov 2012

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Lufthansa plane

By Chinedu Eze

Despite the Senate resolution that the German carrier, Lufthansa, must pay a $14 million (N2.2 billion) debt on unpaid royalties to the Federal Government, the airline may not pay the money it owes, investigations by THISDAY have revealed.

THISDAY learnt Wednesday that the airline may be absolved from paying the amount because of an existing agreement between Lufthansa and the Federal Government, which included a waiver on royalties.

In 2008, the Federal Government had entered into an agreement to give the airline multiple designations to operate from Lagos, Port Harcourt and Abuja airports in exchange for the use of the Abuja airport as its operational hub for West Africa.

Under the agreement, Lufthansa was also meant to provide manpower training and facilitate the development of the maintenance, repair and overhaul (MRO) facility in the country.

Part of the condition for using the Abuja airport as an operational hub included Lufthansa reaching a commercial agreement with domestic carriers that would ferry passengers from the sub region, which led to the selection of Arik Air, and gave Lufthansa fifth freedom rights.

Government at that time considered this as invaluable to the development of the Nigerian aviation industry and therefore decided to grant the German airline a waiver on royalties as part of the agreement.

However, according to sources in the aviation ministry, the Minister of Aviation, Ms. Stella Oduah, on November 7 revoked the Memorandum of Understanding (MoU) between the Federal Government and Lufthansa because “the minister had not seen any appreciable benefit of the MoU with Lufthansa”.

The sources added that the airline did not keep its own part of the agreement, which included assisting in manpower development, development of the MRO facility and use of the Abuja airport as an operational hub.

Lufthansa, on its part, blamed the Federal Government for not creating the enabling environment for it to execute its own part of the MoU.

A few months ago, the Senate Committee on Aviation had held a public probe on the operations of foreign airlines in the country. During the probe, it had established that some of the airlines owed the Federal Government a backlog of unpaid royalties and other unremitted charges.

Chairman, Senate Committee on Aviation, Senator Hope Uzodimma, had said in a recent interview that the committee had given Lufthansa a deadline to pay the debt, failing which it would be sanctioned.

Uzodimma accused a senior official in the Ministry of Aviation of unilaterally giving the airline a waiver on royalties, which are the contributions paid to Bilateral Air Service Agreement (BASA) Fund.

“Are you not aware that under our BASA with Lufthansa, the airline refused to pay over $14 million, simply because one idiot wrote one nonsense letter to the airline that it had been given a waiver without the approval of the minister?

“Only the Federal Executive Council, presided over by the president, can give such an approval for waiver and no other body or person.

“We have since discovered the illegality perpetrated by this official and we told the person to get Lufthansa to pay the money latest by the end of this month (November 2012), failing which we shall recommend the sack of the director that committed the atrocity,” Uzodimma was quoted as saying.

Uzodimma might have stirred a controversy by this allegation, which might pit the Senate against the ministry and those behind the Lufthansa deal during the tenure of the late President Umaru Musa Yar’Adua.

Those affected, it was learnt, were warming up for a fight with the Senate Committee on Aviation.

One official, who was alleged to have been involved in the deal, told THISDAY that it is only Nigeria that still collects royalties, arguing that the reason Ghana had become attractive to foreign airlines, in spite of the country’s smaller population and a lower income per capita, stemmed from the fact that it had removed levies that would discourage airlines from flying to the country, including payment of royalties.

“It is only Nigeria that still collects royalties from foreign airlines. Ghana has stopped doing that and that is why all foreign airlines are flying there,” he said.

Another senior official in the presidency, who also had participated actively in drawing up the agreement between Lufthansa and Nigeria, said the airline had trained local aviation personnel in the Nigeria Airspace Management Agency (NAMA) and Nigerian College of Aviation Technology (NCAT), Zaria.

According to him, the MRO facility had not taken off because “Lufthansa made it plain that it was not going to build the facility for Nigeria but would partner with any Nigerian investor that was willing to fund the project.”

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