Reappraising the Planned Airport Concessions

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If handled in a transparent manner, the airport concessions could actually be the elixir for air transport facilities in Nigeria, writes Chinedu Eze

Stiff opposition that greeted the planned concession of airport facilities had prompted the Minister of State, Aviation, Senator Hadi Sirika to convene several meetings, including the recent stakeholders meetings to convince those who were not inclined to concession to see the reason why the private sector should be allowed to invest in airport development.

But there is justification for the doubt about the efficacy of concession. The fears stemmed from the fact that concession agreements carried out in Nigeria, including the concession of the domestic terminal of the Murtala Muhammed International Airport (MMA2) are still mired in controversies. So the pessimism of labour was not misplaced because from hindsight, workers seemed to be the victims of infrastructure concession and the liquidation of government owned institutions. From the sale of former NITEL to the liquidation of Nigeria Airways Limited (NAL), the workers are always shortchanged. Till date many of the NAL workers are yet to collect their entitlements.

Industry interest groups might have tacitly given support to the concession plan because of the assurance by the Minister of State, Aviation, Senator Sirika that the concession would be carried out sincerely and through due process. They recongise the fact that over the years infrastructure development in the industry has been static, if not retrogressive and that since the past four decades it is only the Lagos domestic terminal, MMA2 that could be described as entirely new structure built in the airports under the management of the Federal Airports Authority of Nigeria (FAAN). And that was done under concession. However, the remodeling programme of the past administration aimed at revamping the decayed facilities, like most government infrastructure projects, was aborted midway.

In addition, it has become highly unlikely that government could deploy funds for airport facility rehabilitation or the building of new facilities. What it could do would be to take loans, like it did with the Chinese loans, which are being used to build the four terminals at the nation’s major airports.

Government is obliged to pay back loans, so concession, Senator Sirika said, is better than taking loans and building airport infrastructure. Under concession, when well conceived, what government would have at the end of the concession period would be far better and bigger than what it gave out in concession. According to industry consultant and CEO of Belujane Konsult, Chris Aligbe, government should envision the airport facility it wants to have and should agree with the concessionaire the modalities for expansion.

“It should be expected that if the concessionaire is taking the facility for about 25 years, it should b programmed that expansion should take place every five years. For example, if presently the airport is facilitating five million passengers a year, it is expected that in the next five years it should service about eight million or more passengers and the facility should be developed to meet that target. So by the time the facility reverts back to government, it would be an entirely different airport facility, more modern and expanded to serve higher number of passenger traffic, possibly from the five million passengers to 30 million passengers per annum,” Aligbe said.

Stakeholders Support

Unlike in the past meetings, many industry stakeholders that spoke on Saturday night gave their support to the concession plan but were more interested in the modalities, what will happen to FAAN workers and whether they would not be given appropriate training so that many of them would be retained. The Minister said that FAAN would continue to serve as airports manager with its retinue of workers and expressed hope that even if at the beginning some workers were relieved of their duties, the concessionaire would employ three times more than the number that would be sacked because the airport facilities would continue to expand and more Nigerians would continue to travel so there will be inevitable job creation.

“We have poor airport infrastructure at the airports and the population is growing. Government does not have money to fund airport facilities development so the only available option is to concession. I assure you that the concession process will be transparent, it will be sincere and it will follow due process,” Sirika said.

Veteran pilot and former head of flight operations of the Nigeria Airways Limited (NAL), Captain Dele Ore commended the Minister for his determination to solve the protracted problem of infrastructural decay of airport facilities. Ore who was the immediate past President of Aviation Round Table (ART) recalled the committee, which he headed that was assigned to carry out the concession programme but the plan was later discontinued.

Also another member of the think-tank group, ART and former Commandant of the Murtala Muhammed Airport, Lagos, Group Captain John Ojikutu (retd) also supported the concession programme but expressed concern about what would be the future of the workers.

The President of National Association of Nigeria Travel Agents (NANTA), Bankole Bernard also gave support for the planned concession and noted that it would put an end to the obsolete facilities that inhibit passenger facilitation. The National Association of Aircraft Pilots and Engineers (NAAPE), Chief Isaac Belami while acknowledging the need for concession the airport facilities, stressed on the need to have major maintenance facility in Nigeria to safe forex, provide jobs for Nigerian engineers.

The Concession Plan

The Minister, Senator Sirika had earlier stated that the method of concession is Public Private Partnership (PPP). Reacting to many questions about what part of the airport would be given out in concession, he said, “The scope of the PPP will be determined by the Transaction Adviser (TA) after careful study and preparation of an Outline Business Case (OBC). The OBC will have to be certified by the Infrastructure Concession Regulatory Commission (ICRC) and approved by the Federal Executive Council (FEC).

“The Staff of FAAN will be responsible for supervising all PPPs and in addition be responsible for running other airports in the country. As the infrastructure expands, more people will be engaged to operate the new terminals. The airports being concession under a PPP arrangement will require regular roles to be played by the both the government and the private sector for success. FAAN will be the government counter party on the PPP contracts for the airport and play government’s role,” Sirika said.

The minister acknowledged that they would be initial lob losses for largely non-technical personnel but observed this would only be in the short term because in the long term, the concession programme would create more jobs.

“What we plan to have is more jobs. Our aim is to increase the size and capacity of the airports through PPP by attracting investments, to create the much-needed hub in West and Central Africa.

In 2007, Jordan awarded a 25-year concession for the Queen Alia International Airport in Amman following a competitive bidding process. The project included rehabilitating existing facilities, constructing a new terminal with a capacity of 12 million passengers per year, and operating the airport. The project generated more than $1 billion in foreign direct investment and led to the creation of 23,000 new jobs over its lifespan. These are type of economic and job creation benefits we will attract by using PPP for our airports,” he explained.

Failure of the Past
But in retrospect, concession of government owned assets has not worked and that explains why many Nigerians doubt the success of such arrangement but the Minister explained why PPP/ concession of airport facilities has not worked in the past and noted that the process has never been done in a structured and transparent manner.

He said the contracts of the past concession were not properly prepared, no risk analysis and no financial models. Consequently, it is not surprising that they end up in litigation.

“However, the ports in Nigeria were concessioned in 2006 through a structured approach. The ports are doing much better post concession,” Sirika said.

But how can the concessionaires be under the supervision of FAAN and how can the agreement be harmonised between the concessionaires and the government agency so that there won’t be litigation in future?

Sirika explained, “As part of the Transaction Advisory services, the TA will have a legal firm as part of the consortium. The TA will review all agreements and litigations and provide a way forward in collaboration with FAAN legal department. The 68 pending court cases will be looked into and various options of mitigation will be provided. In addition, we plan to use modern techniques like establishing aviation Dispute Resolution Board (DRB) of respected experts. The Board will be part of the PPP development and procurement process and will resolve all disputes in the aviation sector.

On the non-payment of Nigeria Airways workers when the airline was liquidated, and action that is fuelling the resistance to concession by the workers, the Minister said, “Nigeria Airways is a sad story indeed. However, we are looking for ways to pay off the outstanding liabilities. We will consider using budgetary provision and we are talking to government on other options. This government will ensure all outstanding liabilities are paid off and we allow Nigeria Airway lie in peace.”

Other Matters

The Minister spoke on forex and how he helped the airlines secure forex window with the Central Bank of Nigeria (CBN) and he is also helping to ensure that the 60 days delay before accessing forex is scrapped for the airlines.

He disclosed that there were plans to make Aviation Security (AVSEC) to bear arms in order to improve security at the airports.

The Minister said government would carry out the resurfacing of the runways and taxiways at the Abuja, Enugu and Lagos airports. It would carry out the completion of on going projects at the airports nationwide, explore alternative funding sources and may look at the accessing money from Pension Fund and drive towards making FAAN a lean organisation by eliminating the present arrangement that is top heavy. Sirika said that this administration would also upgrade the Nigerian College of Aviation Technology (NCAT), Zaria into the International Civil Aviation Organisation (ICAO) Regional Centre of Excellence.

Airport facility concession is a word many workers in the aviation industry do not wish to hear. To them, contained in that word is job threats, the tendency for individuals to take over government assets and possible outrageous airport charges for service, which invariably would hike airfares. But now, it seemed inevitable that it is the only way possible to get out of the quagmire of obsolete airport infrastructure. Now the stakeholders are demanding for sincere and transparent concession.