Mixed Feelings over Planned National Carrier

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The federal government recently unveiled a plan to establish a national carrier that would be private sector driven to leverage the country’s high passenger traffic and take full advantage of the open sky for Africa treaty, but the plan has elicited concerns among industry stakeholders. Chinedu Eze reports

At the inception of the President Muhammadu Buhari administration, the government made it clear that it would establish a national carrier. And when Senator Hadi Sirika was appointed Minister of State for Aviation, he reiterated the promise that the government would establish a national airline and concession the major airports in the country. 

 

Steps 

Nearly three years into the president’s four-year tenure, there is hardly a major kick-start to the proposal for a new national carrier. Yet, the government has insisted that it would establish a national airline before the end of the president’s first tenure in 2019.

But in a recent interview with aviation writers, Sirika outlined the efforts the administration had made to actualise the establishment of a national airline. He said in the next few months, concrete steps would be taken towards the birth of the national carrier.

“I think in the next couple of months, two months maximum, we should be able to have our outline business case of this transaction,” the minister stated. “And then the full business case will follow almost immediately after, because we are doing it simultaneously and after that we begin the process to establish the airline. So I will say that we are very close to having the national carrier established. Certainly, it will be within the first tenure of this administration.”

 

Mixed Feelings 

However, many industry stakeholders are of the view that the idea of a national carrier had become outmoded. They also expressed doubts as to whether the government would be transparent in the process of establishing the airline. They rejected the assurance by the minister that the process would be sincere and transparent, noting that given the widespread corruption in the country, it would be difficult for government to successfully run any business, including operating a national carrier. 

Besides, stakeholders have expressed reservation about the government’s pronouncement that the national carrier would be driven by the private sector. 

Executive Chairman of Airline Operators of Nigeria, Captain Nogie Meggison, said the idea of national carrier was a thing of the past. Meggison noted that besides Ethiopia Airlines and South Africa Airways, government ownership and control of many national carriers that still exist today had been diluted by public shareholding. He doubted whether Nigeria would be able to birth a national airline that would succeed.

One major airline operator alleged in a chat with THISDAY that the aviation minister was, allegedly, planning to “sell Nigerian interest” to a foreign airline, which he would bring in as foreign investor and use it to repatriate Nigeria’s wealth.

The operator alleged, “We know what he plans to do. We learnt that he is negotiating with Middle East airline to bring it in as core investor and side-line the domestic carriers. But the minister should also consider the fact that he would be creating jobs for foreigners; that he will eventually kill local airlines and the country would lose thousands of jobs in the sector. He should also consider the capital flight, because whatever money the core investor generates in Nigeria will be repatriated. Why is he not thinking of partnering with local airlines to establish a national carrier?”

But Sirika has at different occasions denied the allegation that he wants to give away the country’s patrimony. He has assured Nigerians that the transaction would be transparent and in the interest of the country.

“We are on the right course. I believe that the national carrier, which would be driven by the private sector, once established, will become a dominant carrier in Africa,” the minister has said.

 

Gains

The benefits of a national carrier are immense and include job creation. When established, the airline can employ as many as 300 pilots at the beginning, and it has the capacity to generate 10, 000 direct jobs and 20, 000 indirect jobs in five years.

It will help to develop Lagos and Abuja as operational hubs in West and Central Africa and establish operational benchmarks for other airlines in the industry.

A national airline will cut back on capital flight in the industry, saving an estimated $1.6 billion annually and it will lay a solid foundation for maintenance hangar. The national carrier will be the voice of Nigeria in the International Air Transport Association (IATA), African Airlines Association (AFRAA), and other global aviation policy organisations.

 

Aero-politics 

As at 2016, Nigeria had about 70 Bilateral Air Service Agreement (BASA), but while foreign and African airlines operate 40 of them, Nigerian carriers fly only about 10 in Africa and one each in Europe, the United States, and the Middle East. There is no response to all the over 80 weekly frequencies flown into Lagos/Abuja/Port Harcourt by Air France, KLM, Lufthansa, Turkish, Alitalia, Kenya Airways, Qatar, Egypt Air, Royal Air Maroc, and others.

Airline politics is played among national airlines and airline groups. The objective is to protect the interest of the airlines involved. To do this effectively, global and regional groupings have emerged. At the global level, IATA exists to protect the interest of its over 182 member airlines. At the African level, AFRAA plays the role as a bloc protecting the interest of its 32 members.

In Africa, South Africa Airways, Ethiopia Airlines, Kenya Airways, and Egypt Air determine the airline policy. They represent the continent in IATA, African Union, African Development Bank (AfDB), International Civil Aviation Organisation (ICAO), and all other global organisations where airline issues are discussed.

 

Hub

 Every major airport in the world has a major airline that operates from there. Along with a major airline is a major Maintenance, Repair and Overhaul (MRO) facility. When these critical infrastructure and equipment are established, a hub is developed. The fourth critical thing is passenger traffic, which Nigeria has, but the successful Ethiopia Airlines does not have.

So hub development is a focus for all serious nations in the airline sub-sector. According to industry experts, hubs account for over 50 per cent of direct employment in the industry, over 75 per cent of non-aeronautical revenue, as well as extensive collateral benefits to the economy.

All over the world, only national carriers are known to have successfully established hubs –British Airways, Air France, KLM, Lufthansa, Emirates, Singapore Airlines, Ethiopia Airlines, Egypt Air, Kenya Airways, Air Maroc, Turkish Airlines, etc., boast flourishing hubs. 

Observers say in Africa, there are four natural hubs, which are Lagos/Abuja, Johannesburg, Nairobi and Cairo.

“Lagos/Abuja is assessed as the best in geographical location, in population, economic power and stability of the air travel market.  All the other three are being developed by their national carriers, while Lagos/Abuja are lying ‘fallow’ and ‘waste’ due to the absence of a formidable national carrier,” an industry source said.

Huge Cost 

Industry consultant and Chairman of Aso Savings, Ali Mohammed Magashi, said recently at an aviation forum that a national carrier was desirable to buoy the sector. According to Magashi, establishing a big airline is capital intensive, so it is only government that can provide or facilitate the financial outlay needed. He also said the airline sub-sector did not guarantee better returns on investment, yet it requires huge capital, stressing that that is why the private sector is not encouraged to invest in airline business. 

Many airline operators, including Richard Branson, acknowledge that the airline business could make a billionaire become a millionaire, as there is no huge return on investment.

Magashi argued that because of the poor return on investment, the private sector might not be able to invest the required funds in the sector. But he said aviation was indispensable in the economic mix of any country, considering the fact that aviation is a critical infrastructure, which facilitates the growth of other sectors of the economy, as it provides the fastest movement from one place to another, conveying passengers and cargo. 

Because the need for this service is critical, it becomes part of government’s social services to the people and this explains why most of the airlines established in the world before now started as national carriers. 

But the airlines in the US cannot be described as national, but flag carriers. Yet, government occasionally injects funds into them so that they would continue to thrive and provide those services that sustain and grow the economy.

Magashi said, “All the airlines that top the world were either owned or still owned by government. The reason is simple; aviation is not competitive in terms of returns, but it benefits other sectors of the economy and that is where government makes its profit. The truth is, there is no successful flag carrier in the world. So it is evident that aviation cannot be grown by the private sector alone. It is essentially a government turf, but the major challenge in Nigeria is political interference, which inhibited the growth of the Nigeria Airways.”

He outlined the benefits of a national carrier, which the private sector driven airlines in Nigeria cannot provide. These include effective regulation and aircraft maintenance, noting that since the demise of Nigeria Airways Limited (NAL), privately owned airlines have not been able to train engineers; rather, they have gone for readymade engineers who were trained during the period the national carrier held sway. With the demise of and retirement of many of these engineers, Nigerian airlines now go for expatriates. 

So there is dearth of indigenous technical manpower because there is no national airline to train them.

However, despite the potential gains of a national carrier, many industry stakeholders believe the Nigerian government, within the existing political climate, cannot successfully run a national airline because it may not be able to guarantee the needed transparency and corporate governance for its survival.