Nigeria Air: A national carrier of controversy By Kelvin Okunbor

Passengers and stakeholders are anxiously waiting for the maiden flight of Nigeria Air on December 24. The national carrier was unveiled at the Farborough Air Show in London. The take-off of the airline expected to fly into 81 routes on domestic, regional and intercontinental routes, is, however, paved with turbulence.

AFTER many failed attempts to float a national carrier, the Federal Government last week rose to the occasion in faraway London at the Farborough Air Show; a gathering for global players in aviation to unveil the name and livery; otherwise known in ordinary par lance as the logo of the new national carrier – Nigeria Air.

Since the unveiling, torrents of commentaries have enveloped the global arena over the government decision to float a national carrier, 15 years after it liquidated the Nigeria Airways Limited.

The new airline, many industry players have cautioned, must learn from the pitfalls of the former national carrier which they said lacked the right struck to remain in business.

The defunct Nigeria Airways Limited was operated as a social service managed by government agents to serve the interest of politically exposed persons.

In May 2003, the administration of President Olusegun Obasanjo announced the liquidation of the airline with over 6,000 workers and pensioners.

Genesis of Nigeria Air

The emergence of Nigeria Air was a fulfilment of a Presidential Declaration in 2015 by Buhari to deliver a national carrier that will restore the pride of the nation and put the country in a vantage position to reciprocate the over 78 bilateral air services agreement to which the country is a signatory.

To achieve the lofty project, committees were set up and a deadline for the kick-off was set. A few months ago, a task force under the chairmanship of the Nigerian Airspace Management Agency (NAMA) Managing Director Capt Fola Akinkuotu was raised.

The committee’s other members include: Nigerian Civil Aviation Authority (NCAA) Director General Capt. Muhtar Usman; Nigerian College of Aviation Technology Rector Capt. Abdulsalami Mohammed; Accident Investigation Bureau (AIB) Commissioner Akin Olateru; National Carrier Transaction Adviser representative Capt. Tilmann Gabriel; Transaction Adviser for MRO and Aviation Leasing Company representative Layi Are; Infrastructure Concession Regulatory Commission (ICRC) Acting Director-General Chidi Izuwah.

On July 9, the Federal Government received the Outline Business Case (OBC) of compliance certificate from the ICRC.
It (OBC) was developed by a consortium of transaction advisors, including the Airline Management Group Ltd, Avia Solutions Ltd and Tianerro FZE. They were appointed in March by the government.

Receiving the OBC certificate from the ICRC, Minister of State for Aviation Hadi Sirika assured that the process towards procuring the national carrier was detailed and transparent; assuring that the airline will be profitable in the first three years in operation.

He said the new airline will commence operation on December 19, 2018 with five aircraft, to gradually grow capacity to 30 aircraft within five years.

The OBC specified recommended the injection of $8.8 million by the government in viability gap funding and the upfront grant required leveraging private sector investment. It also specified $300 million capital injection in three years by the operators of the national carrier for sustainability.

The minister assured that despite the government’s $8.8 million gap fund, the management and business decisions of the national carrier will be 100 per cent determined by private sector managers.

Sirika said: “The government will step in to cover the viability gap funding, and thereafter, it will ease out. But even with the gap funding, the government will never get involved in the management of the national carrier.

“All things being equal, on December 19th, 2018, we will have the first set of airplanes flying this airline. It will make profit in three years after operations. We will make the investments and follow the business plan through private sector management.

“The national carrier is a bankable business and the government will get a strategic partner who will invest in it. When we get through the bidding process, more facts will emerge.

“The new national carrier won’t be like others in the past. We have made it clear in our certificate that the national carrier will have a strategic world class equity partner who will manage, operate and make the management operations.”

Government’s non-involvement

The extent to which the government would be involved in the proposed airline has been a source of concern to industry players. But, Sirika said during the unveiling in London that the airline will be private sector-driven.

He said: “This will be a National Carrier that is private sector-led and driven. It is a business, not a social service. The government will not be involved in running it or deciding who runs it. The investors will have full responsibility for this.

“The government will not own more than five per cent of the new National Carrier. The government will not be involved in running it or deciding who runs it.”

According to him, the government has opened discussions with aircraft providers, including Airbus and Boeing, regarding the aircraft. He promised to give an update on the talks soon.

Necessity for National Carrier

Some stakeholders say the minister should be more transparent on the identities of the would-be investors. Their demand came on the heels of concerns raised by former African Airlines Association (AFRAA) Secretary-General Nick Fadugba on why indigenous operators were not invited to invest in the new carrier.

According to Fadugba, such offer would provide a good window for the operators to partner with the government.

Other experts, however, reason that the best time for Nigeria to set up a national carrier is now.

Besides, providing jobs for many Nigerian pilots, aircraft engineers, cabin attendant, flight dispatchers and other professionals, it would enable Nigeria reciprocate its over 78 bilateral services agreements that indigenous operators have failed to operate.

Speaking in an interview, Fadugba said a national carrier will curb massive capital flights as foreign carriers take away billions of naira annually.

A national carrier, he noted, will earn respect for the country in the comity of nations, besides serving as an ambassador for the country and carry out critical duties for the government.

It will also enhance the training of skilled workforce in the aviation industry. For instance, a pilot after graduating from the Nigerian College of Aviation Technology (NCAT) in Zaria with commercial pilot license (CPL) needs to type-rate on one aircraft type. Usually, the national carrier provides the platform.

Weak state of domestic carriers

The establishment of a national carrier, many argued, will give passengers travel options as the existing domestic operators have not been offering the quality of service that Nigerians deserve.
An aviation finance expert, Ali Magashi, saw the setting up of the Nigeria Air as the best decision taken by the government. He said it will not only boost Nigeria’s sovereign image but compete with the invading foreign carriers.
Magashi said that only national carrier could restore the lost image of Nigeria in the global aviation stage.

Fear of extinction grips operators

Though a welcome idea, some indigenous operators called on the government to create a level playing field for them and the new national carrier. They specifically called for equity in the allocation of routes to be flown by the new national carrier and urged the government to clear the air on the status of Arik Air and Aero, which they consider as government-run carriers.

Air Peace Chairman Allen Onyema, Topbrass Airlines Managing Director Captain Roland Iyayi and African Business Aircraft Association (AfBA) Chairman Nick Fadugba were among those who spoke at a seminar in Lagos last week.

They said that for the national carrier to work, the government must pay the N45 billion entitlements of former workers and pensioners of the liquidated national carrier.

To them, the national carrier will enjoy their support because it would provide jobs, improve operational capacity and protect the investment of private airlines.

Onyema said that domestic carriers look forward to what will happen to indigenous carriers as much as it will create jobs and done transparently once its privately-run.

Promising not to back any move that will frustrate existing carriers, the Air Peace boss said the modality to allocate routes will have to be looked into, except the government is indirectly trying to decimate existing operators.

Explaining that his airline was not afraid of a national carrier, Onyema said there must be a level playing field where existing operators will be given the opportunity to enjoy same privilege that will be accorded the national carrier.

He said: “The government must do everything possible not to frustrate existing carriers because of private investment. The creation of a level playing field remains critical to the sustenance of an effective aviation sector.”

Onyema urged the government to ease the operational challenges facing local players be making the business a win- win, even as he faulted the government’s skewed policies that favour foreign carriers.

In his intervention, Fadugba canvassed a partnership among carriers as a recipe for survival in an environment that is conducive when the operators are strong enough.

He wondered why local carriers have not forged partnerships, which according to him, “is key to success no matter the size of the carrier.”

His paper raised concerns over the lack of cooperation in the areas of operations; training; spares and maintenance pooling.

Suggesting fleet pooling and personnel training, Fadugba reasoned that the sector has a long way to go until the will government will come with a more thorough approach to funding.

He said: “There is a lot of uncertainty over the new national carrier because of the modality adopted for the project; when the government through the Asset Management Corporation of Nigeria (AMCON) already owns Aero and Arik airlines, implying three airlines under the ownership of the government which has not happened in any country before.”

Urging the government to adopt the aviation model in Singapore and United Arab Emirates to make progress, he said the countries have adopted business-friendly models good.

He, however, spared a thought for the non-implementation of Open Skies Agreement for Africa, which he said when fully operational, could consume some domestic operators.

As a strategy for success, he canvassed strong airlines, hub airports and smart facilities to drive the development of aviation.

Relying on NCAA statistics, Fadugba described as regrettable that foreign carriers have taken over air transport in Nigeria, a development he noted “makes no strategic sense for any country serious about the business of aviation.”

On Hub Airports, he noted importance of connectivity as a key driver of growth of aviation development.
Also speaking, Iyayi, said that government will do everything to make the new national carrier succeed by securing the right access to markets on its routes.

He said the existing policies are a disservice to the survival of private carriers; which are not protected by the government, despite their huge investments.

Iyayi flayed a situation in which local carriers compete on capacity and not on routes.

Worries over project

As at Wednesday, when the airline’s name was unveiled, it had neither an operational office nor personnel in the country. There was no structure to indicate that a new airline was coming on board.

The minister, who said that the airline would be private sector-driven, did not explain the equity of the airline. He has not laos clarified whether the airline would have core investors or technical partners but that the government Qatar Airways have been talking since 2016 about the airline.

At the Farnborough show on July 16 and 17, the minister held talks with Ethiopia Airlines’ Chief Executive Officer Tewolde Grebremariam on partnership agreement.

The development has fueled stakeholders’ fear that the government was yet to secure a technical partner for the airline. They predicated their fear on the fact that only the minister was involved in the discussion with aircraft manufacturers’ on behalf of an airline that would be private sector-driven.

According to AfBAA chairman and AFRAA’s former secretary- general, many questions have not been unanswered in terms of management, funding and fleet of the new airline.

Fadugba, who is African Aviation Services Chief Executive Officer, noted that the government was already the de factoowner of both Aero and Arik through AMCON. He wondered how it would manage these airlines and at the same time establish a new national carrier.

The proposed Nigeria Air, he felt, ought to have a synergy with other carriers to better harness the huge international market.

He said: “There are many questions that need to be answered in terms of the management, the funding and the fleet. So, I believe the government needs to brief the Nigerian people on the national carrier. Rather than doing it abroad, we need to come home and explain to the whole nation what the concept is.

“More important, I am interested in how the national carrier interfaces with all the other airlines in Nigeria. Because remember that the government is the de facto owner of two other airlines: Arik and Aero. So, this is the first time I have seen one government own three airlines. Government needs to coordinate its airlines strategy in terms of moving forward.”

Aviation union’s stand

Unions in the aviation industry have threatened to frustrate the new national carrier over the government’s failure to settle severance payment of the ex-Nigeria Airways workers. They expressed doubt about the sincerity of the federal government.

National Union of Air Transport Employees (NUATE) General Secretary Olayinka Abioye, warned that until the government paid the final severance package of the liquidated national carrier’s workers, the unions in the sector would “ensure that the plan does not come to fruition”.

According to him, the unions have resolved that before the government can float another carrier, the severance package of the former workers must be paid in full, stressing that the government had not been fair to the disengaged workers.

He also explained that the proposed national carrier negated the government’s earlier position, stating, since the unveiling of the plan, no investor known to any member of the public has signified interest.

Abioye said: “We are not concerned about this new national carrier even though it is our baby with supposed benefits to the country. We are much more concerned about the families of the defunct national carrier,some of whom have died.

“We are much more concerned about those who are living and managing to live and we are calling on this minister and the  government to speed up action in whatever capacity they can to ensure that Mrs. Kemi Adeosun, the Minister of Finance, make releases and pay our people. Enough is enough.”

Less than six months to the airlines’ kick-off deadline, there is nothing on ground to show the readiness that an aircraft in the fleet of Nigeria Air would launch its maiden flight as promised by the minister.