As Nigeria Air secures Air Transport Licence, aviation industry stakeholders are eager to know its investors following the federal government’s declaration that it is a private sector driven concern, writes Chinedu Eze
Many Nigerians are looking forward to having a national carrier. Some out of nostalgia, having worked or experienced the defunct Nigeria Airways Limited and some because they believe that national carrier will help to balance the current lopsided international travel market, where foreign carriers hold sway.
Since the Mohammadu Buhari administration took office in 2015 it had nursed the desire to have a national carrier. This was made obvious when the Minister of Aviation, Senator Hadi Sirika announced in early 2016 that Nigeria would establish a national carrier. That announcement aroused the people’s expectation and since then they have been looking forward to the actualization of a national airline.
Benefits of National Carrier
Aviation industry sources said that the federal government sees national carrier as catalyst to the growth and development of other sectors of the economy. This means that the airline would not be established solely for profit but to support other sectors of the economy like tourism, manpower development, aircraft maintenance, catering, developing airports and creating a hub, while the airline is subsidized; maybe, not directly by government but from money generated by ancillary services, while government eliminates charges by the airline that could weigh it down.
But this is contradicted by what has become commonplace; that the airline would be private sector driven, which expectedly means that the private sector would have major stake in the company and ordinarily,private investors put their monies in businesses that would yield them profits.
However, few years ago, the Chairman of Aso Savings and Loans Plc, an aviation consultant, Ali Mohammed Magashi during the Colloquium on Aviation in 2017, organised by Simon Tumba of Nigeria Travel Mart in Lagos, said that airline sub-sector does not guarantee better returns on investment, yet it needs huge capital and that is why the private sector is not enthused in investing in airline business. This is backed by the fact that airline operators, including Richard Branson, acknowledge that airline business could make a billionaire become a millionaire, so there is no huge return on investment.
Magashi therefore argued that because of the poor returns on investment, the private sector might not be able to invest the quantum of funds needed for the sector. But 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; it is indispensable in the economic mix of any nation.
He argued that because the need for this service is critical, it becomes part of government’s social services to the people and this explained why most of the airlines established in the world before now started as national carriers.
Rising Hope
On Monday, the Nigeria Air received the Air Transport Licence (ATL) from Nigerian Civil Aviation Authority (NCCA), the Director General Cpt. Musa Nuhu, presented the certificate to interim management of Nigeria Air.
Nuhu explained that ATL was a prerequisite for the airline to acquire Air Operation Certificate (AOC) to start operating.
According to him, NCAA works and supports all operators currently existing and aspiring in the industry to get necessary documents after meeting all the requirements.
“This ATL has gone through all the processes. So, at this point in time, I will like to do the presentation. We look forward for the fulfillment of the AOC process so that we can hand over AOC certificate to you.
“As the regulator, we work with operators. That is a goal to promote the growth of the industry. It is important to have strong airlines in Nigeria in view of the Single African Air Transport Market (SAATM).
“Also, in view of Africa Continental Free Trade Area (AfCFTA) which can make significant contribution to the growth of Nigerian economy, “ he said.
In other words, the Director General said Nigeria needs a national carrier because it would help the country to compete effectively and promote her participation and reaping the benefits of SAATM and AfCFTA.
Nuhu said Nigeria stood to get the best from the AU Agenda 2063 Air programme being one of the largest markets in Africa, adding that participating in Single Africa Air Transport Market as a nation would increase Gross Domestic Products (GDPs).
The Acting Chief Executive, Nigeria Air, Captain Dapo Olumide said his team would definitely double efforts in order to fulfill all necessary processes to receive AOC certificate from NCAA to start flying.
“We already have aircraft identified because, that is one of the requirement for the NCAA. We are waiting for the terms of agreement with Provider of Original Equipment Manufacturer (OEM).
“What we need now is to go through stages to get AOC certificate from NCAA. No magic in the process. It is not something that can be issued because they like your face.
“When you have an AOC and ATL, you can commence commercial scheduled operations. The date to start operation is largely based on the process one is following to get the AOC certificate,“ he said.
Equity Holding
Former member of the Aviation Road Map Committee, has expressed curiosity on how NCAA gave Nigeria Air ATL without the airline presenting its Memorandum of Association, which would detail the equity holding of the airline, the investors who have majority shares, the technical partner and the 5 per cent presumably owned by the federal government, as it claimed that it would have only 5 per cent stake.
“Before you obtain ATL you have to present your memorandum of association. Maybe the new airline presented it to NCAA. If they did not present it, it means they have started circumventing the rules. If they have the equity holding, why are they keeping it away from the public?
“We want to know how the airline is paying for the lease of the three aircraft they have ordered. Is it from the federal government’s 5 per cent? How have they been funding their activities without investment by equity holders? They should make all these public so that we understand how the airline is progressing,” he said.
Managing Director of Flights and Logistics Solutions Limited, Amos Akpan, in an exclusive interview with THISDAY on Tuesday, x-rayed the consequences of keeping Nigerians in the dark about the equity holding of the airline.
“If they say the airline will be private sector driven, who are the investors? What percentage of equity is privately owned and by who? We should know because it’s our traffic rights and our air services agreements they will exploit. The new airline is expected to be efficiently managed. We expect the management to have learnt from the mistakes of its predecessor. For profitability, it’s too early to determine, but their feasibility should show profitability. The caution is that the unique Nigerian environment poses its own threats to the hypothesis and analysis in the field of operations. What you contend with in field operations beats the experts’ predictions,” he said.
Increasing Capacity
Akpan also noted that Nigeria Air would not address the problems currently challenging the industry, but it would add to existing capacity: more seats, more cargo space, more flight frequencies, adding that it would not bring down the cost of fuel, the cost of personnel, the cost of forex, the cost of handling, and the cost of funds, but it would create room for recruitment in the industry.
“It’s coming into operations is indicative of a vibrant sector still attracting investment,” he said.
Akpan said that it would be too early to determine if the airline would survive, stating that it depends on the choice of business module, which he said would be a key to its ability to sustain its operations.
“This will determine the aircraft type, the routes, and its unique competitive advantage. I don’t think they will be insulated from the same problems facing existing airlines that are currently in operations. It takes a minimum of nine months for a fresh applicant to go through the process and be issued an AOC; Nigeria Air still has till 2023 to know her date to commence operations. That is a long time from now. The impact of Nigeria Air in the industry will not be felt until some months after it commences flight operations. Add six months to nine months, hypothetically, anything can still happen. We can only remain hopeful,” he said.
The Secretary General of Aviation Round Table and former Commandant of the Murtala Muhammed International Airport, Lagos, Group Capt.John Ojikutu (retd), told THISDAY that he is still doubtful whether the airline would eventually materialise, despite its obtaining of Air Transport Licence.
He queried the dark clouds surrounding the airline’s ownership and equity holding and expressed his view about what industry stakeholders and other Nigerians are expecting to have as national carrier.
“I have my doubts except we are banking on a government carrier and not a national carrier. We were told the carrier would include foreign technical partners/investors 40 per cent; Nigerian investors 30 per cent; Nigerian public 25 per cent and the federal government, 5 per cent. It is the shareholders of 5 per cent we are hearing about daily; where are the major shareholders of 40 per cent, 30 per cent and 25 per cent? Don’t they talk? By the way, what is the share capital? What contributions are we expecting from the various shareholders?” Ojikutu asked.
Domestic Service
Official source from the Ministry of Aviation told THISDAY that the new airline would start with domestic service in order to gain experience, after which it would extend to regional service and finally international service.
The source argued that the national carrier alone would not take all the Nigerian Bilateral Air Service Agreement (BASA) routes but would be thrown open to all local airlines.
But THISDAY learnt that the Nigerian government has not pushed for any domestic airline after Arik Air and Melview Airline to operate to London, which is a very lucrative route, despite the fact that government has designated some of them to the route, observing that government is hoping that when the national carriers starts operation its first international destination might be London.
“You know that when a country designates its airline to an international route it will follow up with diplomatic procedures to ensure that the airline is accepted by the country so designated, especially when that country’s airline or airlines are already operating to your country. That way you remove impediments on the way of the airline and you can even take drastic action when you don’t get the response you want by even stopping that country’s airline from operating to your country,” the official told THISDAY.
Ministry official also said that the management of the new airline has embarked on recruiting technical staff and soon its offices in different parts of the country would be opened.
However, Ministry of Aviation officials, including those driving the Nigeria Air project have kept mum over questions on the equity holding and it is government that is funding the process of establishing the airline.
It is the same government with supposed 5 per cent equity that disclosed that it has the plan to acquire 30 aircraft for the airline in five years. It is this ambivalence that has made industry insiders to be sceptical about the planned national carrier.
