Nigeria Air project hits stormy weather - PUNCH
NOVEMBER 22, 2022
EVEN before launching its first flight, the Nigeria Air carrier has run into stormy weather. Last week, a Federal High Court sitting in Ikoyi, Lagos, issued an interim injunction restraining the Federal Government and its partners from taking further action on the proposed airline. This coincided with reports that officials of the Ministry of Aviation are opposed to the management structure proposed by the majority stakeholder and technical partner, Ethiopian Airlines. While the outcome of the court case is being awaited, it is another opportunity to appraise the country’s aviation sector and its revitalisation.
The current turbulence reflects the incoherence and lack of unanimity in the industry. Whereas governments and the aviation industry elsewhere collaborate closely, Nigeria’s situation appears to be the opposite. This is playing out in the Nigeria Air spat.
Displeased with some details of the project in which Ethiopian Airlines has a 49 per cent stake, domestic carriers under the banner of the Airline Operators of Nigeria had approached the court seeking a termination of the deal. They want the court to withdraw the Air Transport Licence issued to the airline by the Nigerian Civil Aviation Authority. The plaintiffs alleged that the company chosen as Transaction Adviser was incorporated only in March 2021 and is linked to the Minister of Aviation, Hadi Sirika. Furthermore, AON alleged that the ATL granted to Nigeria Air evaded the usual security clearance.
Discordance reigns in this critical economic sector. While some operators claim that the incursion of Ethiopian Airlines would send domestic airlines out of business, others disagree. Sirika argues that the carrier is part of the government’s aviation roadmap and would create jobs. He insisted that stakeholders were actually carried along “at every step” and believed the court would vindicate him.
The sector needs revamping through visionary government leadership working in collaboration with private capital. The collapse of the state-owned Nigeria Airways has been followed by the crash of several once-thriving private airlines. Only a few domestic carriers remain going concerns, many others struggle.
Though the IATA estimates that Nigeria’s air transport industry contributes about $600 million to annual GDP, and together with tourism, hospitality, and on-site enterprises employs 20,000 persons and supports another 35,000 jobs, the industry is nowhere near its full potential. In South Africa, the industry provides $5.2 billion of GDP and along with the hospitality and tourism sub-sectors supports 472,000 jobs.
As this newspaper has articulated repeatedly, transforming the sector requires policy initiatives liberalising the operating environment to attract investment. The government rolled out an Aviation Sector Roadmap targeting $14.16 billion contribution to GDP, but Sirika and the President, Major General Muhammadu Buhari (retd.), have been slow in driving reforms, especially in infrastructure provision.
The regime has been foot-dragging on the plan to concession four international airports – Lagos, Abuja, Port Harcourt and Kano — despite statements of such intent dutifully repeated during every national budget consideration cycle.
Instead, both men are obsessed with the state-sponsored national carrier dream, which they incorporated in the roadmap. Sirika’s argument that Nigeria needs one to take advantage of the 80 Bilateral Air Service Agreements it has with other countries is valid. But a government-promoted carrier is a wrong approach. The United States and Western European countries have the largest aviation industries outside China, but their carriers are not government-sponsored enterprises. Most European Union countries have largely privatised their formerly state-owned carriers.
Having one or even multiple national carriers is a desirable objective; but given Nigeria’s odious experience with state-backed commercial enterprises, one that is a government initiative unsettles stakeholders. Past efforts to float a national carrier floundered as major international players avoided doing business with Nigerian officialdom. The country’s reputation for contract violation, policy changes, corruption and bureaucratic muddle has played out in failed partnerships with Virgin Atlantic, KLM and others in the past.
For an emerging economy with its physical size, population and resources, stimulating the aviation and ancillary sectors by liberalising the operating environment will promote domestic and foreign investment. The government should set parameters and designate the best domestic private airlines to utilise the BASAs. Experience around the world proves that enabling private airlines’ growth through competition is better than pouring public funds into failing state enterprises. The government’s role should be restricted to creating a competitive environment for private investment.
Certainly, some world class airlines, including Ethiopian Airlines, are state-owned, but Nigeria has a terrible record in managing state enterprises. Absence of a strong national carrier is a symptom of the sector’s malaise, not the problem. Though the Federal Government holds only five per cent equity in Nigeria Air, the usual cloud of controversy associated with official transactions is already enveloping it.
The government should rather solve the industry’s problems. One is under-investment; privatisation and liberalisation will facilitate investment in airports and hospitality. Redressing the absence of large domestic hangars to undertake routine aircraft maintenance should also be a priority to conserve the N1.04 trillion the Federal Airports Authority of Nigeria says the economy loses yearly to the routine servicing of Nigerian-flagged aircraft abroad.
Effective regulation and investment in advanced navigation aids should be Sirika’s priority, and the government should also solve the aviation fuel scarcity crisis. The AON says over 70 domestic carriers have collapsed in recent years; enabling some to revive and new ones to emerge is the right way to go.
Through fiscal incentives, provision of modern technology, Ireland is a major international aviation hub and according to Cogency Global, a consultancy, over 50 per cent of leased airplanes operating worldwide have a connection to Ireland. Once state-owned, British Airways is now privately-owned by an Anglo-Spanish consortium, and Britain has also privatised its airports.
When the legal dust settles, Buhari and Sirika should implement the airports concession plan, liberalise the operating environment to attract investments, and facilitate the emergence of large, resilient Nigerian airlines. Governments should hands off commercial enterprises entirely and concentrate on regulation and supporting economic sectors.