Nigeria Air faces investors’ apathy, misses fifth take-off after N14.6b

Nigeria Air faces investors’ apathy, misses fifth take-off after N14.6b

Nigeria’s bid to float a new national carrier may be heading a wrong zone, with credible investors and technical partners allegedly reluctant to embrace the high-end enterprise.

According to The Guardian newspaper, the development, following the completion of the bid process, is another drawback for the July 2022 take-off, as well as nurturing the airline to stability before the end of this administration. It was the fifth time the national project has aborted the crucial take-off.

The hard-sell, The Guardian reported, may not be unconnected with the state of the global economy, local peculiarities, including political uncertainties in an election year, and the project setup that has already gulped over N14.6 billion from a government that has only five per stake in the airline.

Industry stakeholders are far from being impressed with the ongoing ‘hawking’ of a new airline and other elements of the aviation development roadmap that was launched in 2016. None of the five elements has been delivered within nine months to the end of the administration.

Though the project consultants are optimistic about the new carrier, others demand attention shift to pressing existential issues that are threatening the entire sector.

It would be recalled that President Muhammadu Buhari had, during the 2015 electioneering campaign, promised to float a new national carrier as a replacement for Nigeria Airways which was hurriedly liquidated in 2004.

The Minister of Aviation, Hadi Sirika, 2016, rolled out an Aviation Roadmap development agenda for the transformation of the sector. The plan had as a priority, the new national carrier, the concession of all the airports for efficiency, aircraft leasing companies, maintenance facilities and the development of aerotropolis.

After its christening before an audience of investors at the Farnborough Airshow, London, in July 2018, the Nigeria Air was scheduled to take off in December that year. Criticism at home and lack of budgetary provision forced the Federal Executive Council to set it aside indefinitely. 

The minister, during a budget defence session in October 2020, told the Senate Committee on Aviation that the Aviation Road Map agenda would be executed in 2021, with the national carrier component getting priority.

On November 23, 2021, after an FEC meeting, Sirika announced that the airline would now take off in April 2022. Officials of the ministry while boasting of the likelihood of partnering with the likes of Turkish Air, Qatar and Ethiopian Airways had hinted at a first-quarter launch date.

But at the commencement of the bidding in March 2022, the minister reaffirmed that the Federal Government would own a five per cent stake in the airline, while the general public will own 46 per cent and the international partner airlines take 49 per cent shares.

“I believe that by April (2022), we should be able to have our AOC ready, which means we are ready to start. And once the AOC is in our hands, the offices are secured, the interim board is being constituted, and when they finish signing the contract, we will announce who they are.”

The bidding was extended by one month “on the request of bidders”, hence, the take-off date was again shifted to July 2022. The airline still didn’t take off.

Sources within the ministry confirmed that the bid processes and verification of interests had been completed and the winners would soon be announced.

“We have bidders but maybe not the big global players that one would have expected of this type of venture. Nigeria is a big market any day and any time. But the global situation is understandable. The managers will make do with what they have to give Nigeria a befitting airline. It is better to delay and get things right than to rush through the process,” a top official said.  

The false starts notwithstanding, the project has continued to attract appropriation from 2019 to 2022, now summed up to N14.65 billion. About 40 per cent of the sum (N6.25 billion) has been channelled to working capital, consultancy and transaction advisers’ fees.

In the 2019 budget, the project was awarded between N8 billion and N47 billion, with an additional N500 million for its transaction advisers. The 2020 budget had N4.6 billion for its working capital, while the 2021 appropriation added another N1 billion to working capital.

The 2022 budget voted N400 million for the airline, with an additional N150 million as a consultancy fee.
 
While the airline did not exist prior to or during the pandemic, it was given priority in the N27 billion aviation bailout funds to cushion the devastating effect of the pandemic on businesses.
 
Another informant said the apathy might be linked to the government owning a paltry five per cent stake while getting ready to float the carrier before bringing partners onboard.

“I think they are putting the cart before the horse. If you have such heavy votes and design ready, why are you still looking for partners? Potential partners can also see that this is a country approaching a transition phase and the government rarely keeps agreements. I heard some of the presidential aspirants already condemning the new national carrier plan. That is a caveat emptor warning signal to any serious investor,” the source said.

Special Assistant to the Minister on Public Affairs, Dr. James Odaudu, however, denied the apathy claims, saying the bid process had “a lot of submissions” that are currently being evaluated.

“Work is ongoing on the project. You are aware of the approval for the wet lease of three aircraft recently. I cannot be definite on the take-off date but once the NCAA approves the Air Operators’ Certificate (AOC), then, very soon the airline will take off,” Odaudu said.

Aviation security consultant, Group Capt. John Ojikutu (rtd), said such huge votes and self-contradicting steps made it difficult to understand what the project is really about at the twilight of the administration.

Ojikutu said: “I am not too surprised about the hawking of the national carrier going on today in an election year. All political office holders’ spending comes up only about a quarter to go in an election year. N19.5 billion in intervention funds for government agencies came in the 2007 election year. N200 billion in intervention funds for private airlines came in the 2011 election year.

“Request for N64 billion for Abuja second runway came in 2015 election year; though rejected, but came out as N5 billion for the Abuja runway repairs. A $338 million request for the national carrier in the 2019 election year was rejected or better still, stood down by the FEC in November 2019. I am not surprised about the stillborn national carrier coming up again in the 2022/2023 election year and I have shown my sincere objections to it publicly,” he said. 

Ojikutu, who was at the forefront of support for the project until recently said he gave up when he saw that the government was going to own just a five per cent equity share.

“Who are the other shareholders? We need to know the institutional investors. It (Nigeria Air) would most likely go the way of Nigeria Airways if care is not taken. What is the actual fund for the setting up of the airline? How much does the five per cent amount to?

“Government should set up a flag carrier and not a national airline. Government should not put a dime on this project. I am sorry to say that this airline may not last and may also end up like Virgin Nigeria,” he said.  

Ojikutu’s worry is valid in the light of routine losses recorded by similar national carriers in the East African region. For instance, Uganda Airlines is a source of worry for the Parliament following the loss of $43 million in 2020/21 financial year and another round of losses expected in the forthcoming 2021/22 report.

Kenya Airways, last week, reported a loss of $82.4 million for the first half of 2022. The airline recorded a $95.8 million loss for the same period in 2021. It was the ninth consecutive half-year loss for the airline that had routinely depended on state bailouts.

Lead consultant on the project, Prof. Tilmann Gabriel of African Aviation & Aerospace University, however, told Arabian Aerospace that the Nigeria Air project has a bright prospect and the minister was pushing to develop the aviation sector.

Gabriel said the small initial fleet means that the airline would operate domestically for the moment. It will be based at Abuja Airport and its initial route will be Abuja-Lagos, linking the country’s two most important cities.

“The new owners, I would imagine, would want to expand the domestic operation, get an International Air Transport Association (IATA) operational safety audit (IOSA) added, and then international flying could get started in year two or three,” Gabriel said.

The aim is to grow the airline slowly and steadily, said Gabriel. “It’s a very clear business case that’s built on facts and reality. You can’t start international flying unless you have domestic connections, an IOSA audit, and all the credibility. To go to Europe, you have to go to the European Aviation Safety Agency (EASA) and get approval.”

Gabriel assumed there would also be some nervousness among existing Nigerian airlines because the ‘new flag-carrier would have a lot of support domestically, as well as internationally from its strategic partners.

“The fact that it would have a business plan, good governance and a long-term outlook were likely to increase that nervousness. Nigerians would like to see domestic and regional airlines that are punctual and reliable, are bookable by apps or websites, and offer tickets payable online by credit cards,” Gabriel said.

President of ASRTI, Gbenga Olowo, had said the idea of the government owning a stake in the carrier is discriminatory to other local airlines and would be inimical to free competition. Olowo said the alternative should be replicating equal commitments to all other airlines.

I think the government’s five per cent equity in Nigeria Air should be done for all 22 private Nigerian airlines on the ground, to level the playing field. If the government will be fair, it should give equal support to all; concessions for concessions, tax relief for tax relief, the same exchange rate for all, overflight charges, slot, terminal allocation, and so on, should happen to all equally.

“The right nomenclature should be flag carriers, not a national airline. Or, have the airlines come together under mutually beneficial codeshare/block seat agreement to build a united, strong mega carrier. That is, using the Nigeria Air project as the consolidator of all,” he said.
 
Olowo, who is the President of Sabre Network in Nigeria and West Africa, added that the idea of leased aircraft was unbefitting for Nigeria which has multiple bigger airlines, and about two in the care of Asset Management Corporation of Nigeria (AMCON) – a Federal Government’s debt recovery vehicle.
 
He said: “A national carrier startup with three wet-leased aircraft and no single Nigerian crew onboard is undeserving for the country. There are bigger operators like Arik and Aero that are already in government portfolios and lying in-state. Why not add the three wet-leased aircraft to their fleets as a stopgap, rebrand them Nigeria Air, and subsequently offer it to the public?” he queried.

administrator

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *