Uncertainty over Planned National Carrier

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Minister of State for Aviation, Senator Hadi Sirika

The federal government recently reiterated its plan to establish a national carrier, but industry experts in recognition of dismal failure of similar projects in different parts of the world have expressed concern about the success of the project, writes Chinedu Eze

Since after the demise of Nigeria Airways Limited (NAL) in 2004, every succeeding government have toyed with the plan to establish a national carrier. But this remained stillbirth until now that the President Mohammadu Buhari administration also keyed into the programme.

In fact, by mid last year, many Nigerians had started celebrating the birth of a new national airline to the extent that it became a campaign mantra for political aspirants, such that one aspirant built an imposing billboard with the photograph of an aircraft in national carrier livery.
So that was late September last year when the federal government announced that the national carrier project was suspended indefinitely, some were frustrated.

But after his swearing-in last August, the Minister of Aviation, Senator Hadi Sirika, exhumed the project and insisted that it would come to fruition, adding that it is a cardinal project to reposition the aviation industry by the current administration.

There is a unanimous agreement among industry stakeholders that Nigeria needs a major airline or airlines that would have full backing of government to address the dominance of the international air travel market by foreign carriers and also strong airlines that would address the lopsided Bilateral Air Service Agreement (BASA), which benefits other countries in partnership with Nigeria, as government has over the years failed to fully back privately owned commercial airlines.

Government has also given foreign airlines advantages by not making it compulsory for them to partner or have any kind of collaboration with indigenous carriers, as obtained in different parts of the world.

So it is the prevailing scenario that gave vent to the call for the establishment of national carrier, which many believe would be the answer to the failure of the country to have a strong carrier.

However, globally, the mega carriers of the world started as national carriers, but while those owned by advanced nations have remained successful, after governments had divested majority stakes and sold the shares to the public, many others, especially in Africa and other growing economies have grappled with the survival of their national airlines.

Even till now, the future of Alitalia, Italian national airline, is uncertain.

In Africa, beside Ethiopia Airlines, Egypt Air, South Africa Airways, Royal Air Maroc, Kenya Airways, Air Algerie and many others are still supported by their government or agencies connected to the government.

Recently, Cameroon national carrier, Camair-Co went under and Kenya Airways is being challenged by foreign and local debts. Also, Air Namibia has become insolvent.

Therefore, these failures have cast doubt on the veneer of optimism of the federal government that it would birth a successful national carrier.
Even the Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison, said that national carrier has become outmoded idea, which is out of tune with modern airline business.

Worry
Industry stakeholders have observed that from the way the government is going about its plan to establish the national carrier, existing airlines are apprehensive that when a new national airline is established, government in order to protect its own carrier would give it advantages over the ones owned by private investors.

They also noted that by establishing a national carrier, government would become the regulator and operator; even though it has stressed at several occasions that government’s stake in the planned airline would be negligible.

In fact, subordinating them against the national airline is the major fear of domestic airlines because from hindsight, government would give the new airline a head start on lucrative routes, stand behind it in negotiating for international destinations and the new carrier would take prime places at airports at the expense of other airlines.

However, industry consultant and CEO of Belujane Konsult, Chris Aligbe, said such fear of suppression by government could only thrive in the imagination of the operators because from past experience, whatever government gave to the national carrier, it also gave to private commercial airline operators. He noted that when the airline business was liberalized in 1988, every opportunity given to Nigeria Airways was also extended to other operators.

Government’s Bias
But that apprehension may not be misplaced, looking at government’s efforts to ensure that national airlines succeed. Expected government’s bias in support of the national carrier is well known all over the world.

This is why suppliers, lessors and even banks believe that government airlines are usually given advantage over their competitors and they believe that it would be more difficult for private commercial airlines to survive in an environment where national carrier draw all the attention of the government, recognising the fact that no airline can succeed without government’s support.

THISDAY investigations have revealed that whenever government announces or reiterates its decision to float a national carrier, it affects domestic operators, as some of them lose their foreign partners who either terminate existing agreements or abort talks for new business with the belief that airlines face a tightrope when they compete with national carriers in a domestic market.

The Director General of Airport Council International (ACI World), Angel Gittens, had told THISDAY in Lagos, that countries waste money to establish a national carrier, which becomes a drainpipe as it blunts competition and because government would not want its airline to fail, it spends more money on it.
At some time government may not want equal competitive environment in order to protect its own carrier. Gittens also said the way Nigeria is; it does not need a national carrier.

“The first thing that happens is that your national carrier gets into trouble because typically the national carrier is very inefficient because of the government subsidy and so it is more subject to governmental types of economics and not the market, they haven’t been exposed to the market.

“So when they do suddenly get exposed to the market sometimes they fail. And that is very difficult for a political leader to accept the failure of its national carrier. There is loss of identity for the country but in the long run, they are better off because they get more connectivity because you get other airlines coming in to try to compete with this airline that is subsidised.

“When this is done true market forces can start and if you have a decent market, your market is really determined by other things not your airline. Your market is determined by the magnetics of your destination, the economy of your country, the percent of the middle class that you have in your country that can travel, whether you have a strong Diaspora, because visiting friends and relatives is very strong reason for travel.

“So there are all kinds of magnetics within your country and that is what you have to look at. You have to look pass your national carrier and if you have strong magnetics, frankly you don’t need a national carrier.

“Now if you don’t have strong magnetics then maybe you do need a national carrier, maybe no one else will serve the country then you have to work on getting that magnetics.
“In Nigeria you don’t need that, I mean it has a huge population, a big middle class, very strong economy, you have all kinds of magnetics, you have the Diaspora, all the things I was just talking about, Nigeria has; so you don’t need a national carrier,” Gittens had said.

Creating Viable Domestic Market
Industry stakeholders also urged government to take actions to enlarge the domestic air travel market by ensuring that every airport in Nigeria has safety critical facilities.

Stakeholders also posited that government should initiate policies that will encourage more Nigerians to travel by air. This, they said is possible if fares could be lower than what is currently obtained, noting that cheaper fares are possible if government could lower the price of aviation fuel by producing it locally and reviewing charges levelled on airlines downwards. With such a larger market, both national carrier and airlines owned by private investors would have enough passengers.

When the federal government announced the indefinite suspension of national carrier programme in September last year, Meggison, had noted that the decision to float a national airline was not a wise one because it was coming at a time when many national carriers all over the world have been privatised with shares sold to the public, except in few cases.

“All over Europe South America, USA today, 90 per cent of former national carriers had been made private, including Lufthansa, British Airways etc. Also, they are all flag carriers which are completely private entities,” he said.

Meggison had said South African Airways has been termed as being in insolvency in the last 10 years and has been receiving from the government bailout yearly ($400 million) in order for it to stay in business. Kenya Airways has equally been struggling. The airline is facing tough financial crisis that is threatening its very existence, “the airline recently got a $750million bailout in the past year.”

“During these tough economic times, why do we want to rush and spend $3 billion (alleged cost of the national carrier) on an airline that we know will not make profit? We know how many Nigerian roads can be tarred with the funds.

“The truth is that the whole national carrier concept is totally unsustainable and will be a drainpipe that will lead to wastage of our scarce resources.
“Nigeria does not need a National Carrier. Like what operates in advanced countries of the world, what Nigeria needs are strong private airlines that are allowed to operate in a friendly operational environment with a level playing field and policies that ensure their survival,” Meggison had argued.

Since the demise of Nigeria Airways, domestic airlines owned by private investors have been collaborating with the federal government to carry out national services, from Chanchangi Airlines, which represented Nigeria on United Nations airlifts to Arik Air which at various occasions carried out national assignments for the country to Air Peace, which not only airlifts national football team but recently saved hundreds of Nigerians by freely evacuating them from South Africa. This means that Nigeria may not need a national carrier in order to carry out national assignments.