Prospects, problems of flying Nigeria Air on borrowed wings
Choice of Ethiopian Airline as the technical partner and major shareholder in Nigeria’s new national carrier has elicited more questions than handlers anticipated. Erstwhile advocates of the carrier are worried that Nigeria Air is walking the path of past mistakes and not in the long-term interest of the country. WOLE OYEBADE examines posers that should not be glossed over, if the new venture must last.
President Muhammadu Buhari in the prelude to the 2015 general elections pledged to float a new national carrier as a replacement for the defunct Nigeria Airways. Then, it was one of the best pledges ever made in the local aviation industry!
Not a few aviators warmed up to the idea at the twin stakeholders’ meetings in Lagos and Abuja in the fall of 2016 where Hadi Sirika, Aviation Minister, rolled out plans to float the carrier, with the complement of airport concession, aircraft leasing company and homegrown Maintenance Repair and Overhaul (MRO) facility.
After initial optimism, not much was heard of the fancied projects until July 2018 when it surfaced at the London Farnborough Airshow, United Kingdom. There and then, it got christened ‘Nigeria Air’. Nigerians reacted negatively and the new airline lost half of its followers! They could not fathom the idea of unveiling a new baby without knowledge of her parents and miles away from home.
Some days ago, shortly after Sirika announced other partners in the Nigeria Air project ahead of its take-off this year-end, the carrier literally lost the remaining loyalists that had been waiting for its belated take-off.
While the stakeholders did understand the need for a Public Private Partnership (PPP) model (with government owning only five per cent equity, private sector 46 per cent and foreign technical partner 49 per cent), least anticipated was the rationale behind a fellow African competitor, with ambitious plans, operating the national carrier of Nigeria.
With Nigeria Air becoming a subsidiary of Ethiopian Airline (ET) already, what fate awaits Nigeria’s several Bilateral Air Service Agreements (BASAs) with other countries and existing local airlines in the feisty competitive air transport sector? Who are these other local investors? At what cost are their equities and in whose interest?
From hero to zero
Clearly, almost all industry stakeholders are unanimous on the need for a new national carrier after the hurried liquidation of Nigeria Airways in 2004. Besides the eminence of flying the green-white-green in international airspace, waiting to be tapped is the grossly underserved local air transport market and Nigeria’s over 100 BASA routes worldwide.
In a poll recently carried out by Avaero Capital Aviation, 75 per cent rallied behind a new national carrier. The trouble, however, is how the handlers are going about it, with 93 per cent dissatisfied with foreign airlines owning the largest share.
Besides the blunder of the London launch, the project has largely been a suspect and lacks the transparency expected of a national enterprise. Recall that it initially picked December 23, 2018 take-off date without any budgetary provision for that year. From 2019 to 2021, the airline has racked up appropriation votes of N14.65 billion, yet the Federal Government was meant to own only five per cent equity. The minister recently said only N400 million had been approved thus far. In the 2023 budget, the government is proposing N1.3 billion, with N700 million as “working capital” and N200 million as consultancy fee.
To test the waters of global aviation investors, the Ministry of Aviation advertised in international newspapers inviting technical partners to own 49 per cent stake of Nigeria Air. After two months and another one-month extension, only Ethiopian Airlines showed interest in Nigeria Air.
The ministry, in disclosing the “preferred bidders” also announced the trio of SAHCO, MRS and the Nigerian Sovereign Investment Authority (NSIA) as custodian of 46 per cent private sector equities. But barely 24 hours later, the ministry issued a rejoinder that NSIA was included in error.
Those pitfalls notwithstanding, Sirika recently told the parliament that there is nothing wrong with having only ET bid for the national carrier, adding that the airline was almost ready for December take-off.
On borrowed wings, made in Ethiopia
Ethiopian Airlines is indeed the most successful African carrier and an advocate of African airlines competing with other foreign carriers to wrestle the African market share currently skewed in favour of European, American and Gulf carriers by 80 per cent.
In pursuant of its Vision 2035 to connect the nooks and crannies of African airspace, the airline, 100 per cent owned by Ethiopian government, has major stakes and ownership in eight African countries already. ET recently listed Nigeria Air as its ninth “subsidiary”.
Former Managing Director of Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi, said the choice of ET amounts to a giveaway of the local sector and Nigerian commonwealth to Ethiopia.
Iyayi said to accord unfettered access in the name of technical partnership to a co-competitor that already has multiple entries into Nigeria, “smirks of deceit and the entire process opaque, with no strategic sense in it.”
The CEO of Top Brass Aviation said the ET partnership would totally decimate the domestic carriers through sabotage.
He said: “I had expected the government to have studied Vision 2025, now Vision 2035 of ET. What they have done in anticipation of the Single African Air Transport Market (SAATM) is to dominate the African market, which should be our primary objective too. We have the market that no one else has on the continent.
“ET has partnerships in eight other countries in Africa. Now, they have 135 planes. They have also said that they will increase the fleet size to 250 within the next five years to go into all the domestic markets where they have footprints, with Nigeria now inclusive. What they are trying to do has been called aviation colonialism of Africa. Is it that our government is not in the market to see all of this and understand the clear strategy?” Iyayi queried.
By the partnership design already made known, ET is expected to deploy three Boeing 737-800 aircraft on domestic routes with Ethiopian crew onboard, and with no financial contribution.
Principal Manager, Avaero Capital Partners, Sindy Foster, noted that Nigeria gave one of the highest share capitals (49 per cent) to ET, compared with 40 to 45 per cent given by lesser economies, like Chad, Togo, Cote D’Ivoire, Zambia, Malawi, Guinea, Mozambique and DR Congo, in owning stakes of their national airlines.
Turbulence on BASA routes
Secretary General of Aviation Safety Round Table Initiative (ASRTI), a think-tank group of local aviation, Group Capt. John Ojikutu, described the national carrier project as “an adulterated wine in an old skin.”
Comparatively, Ojikutu said the current partnership model with Ethiopia Airlines rehashes the earlier failed marriages that Nigeria Airways had with British Airways, South African Airways, and also the making of the failed Virgin Nigeria.
“Now, we are repeating the same mistakes of bringing in our competitors into our own Bilateral Air Service Agreements (BASAs). It will not work nor give us any advantage,” he said.
Ojikutu’s worry is not unconnected with the BASA rules that were invoked against Virgin Nigeria’s (VN) operations that prevented it from flying Nigerians to the United States. Since the British carrier, Virgin Atlantic (VA), owned the dominant stake in VN, its Lagos-U.S. operations by VN were seen as VA attempting to gain entry into the U.S. through the back door.
“We are now making the same mistakes by giving the dominant ownership and control to a foreign airline. It means Nigerians will be flying through Addis Ababa to reach other parts of the world. We are really going to have a lot of problems flying international under ET’s operations and control.
“By the way, we have already given ET four destinations in Nigeria. Are we going to stop that or our national carrier will be competing with it and sharing the earnings at our four international airports? It will not work,” Ojikutu said.
Imperatives of level playing field
Chairman of West Link Airlines Limited, Capt. Ibrahim Mshelia, reckoned that a new national carrier was meant to be a good idea for the country.
However, “so far, there is a hidden interest and lack of transparency as we have seen, this project is bound to suffer, and add more to our problems.”
Ideally, Mshelia said the Federal Government should concentrate efforts at addressing local issues and work transparently within the industry and for Nigeria’s interest.
He said: “There is no way ET will set up a Nigerian carrier that will be in competition with itself. I had expected that the new national carrier will have some of our local carriers as its partners. I expected to see an airline like Air Peace owning 25 per cent stake. But what we are seeing are ministry staff at the forefront of the project. Who are they representing? We don’t know, but we need to know the real owners of Nigeria Air. This is just another airline, not a national carrier.
“The national carrier project is a good one, but we should also take the local aviation’s bull by the horn by reducing the burden of local operations to make the business environment better and be able to have competitive tickets in the region.
“If we want to have robust aviation, we must also follow global best practices. Foreign airlines get their funding at 1.5 to three per cent interest rates and spread over 25 years. Until we are able to do that by way of support for local airlines, we would keep having problems and complaining that local airlines cannot compete,” Mshelia said.
Travel consultant, Sunday Olumegbon, added that neither the national carrier nor ET is the problem, but how the handlers have carried on with the project.
“I believe we need a national carrier. Yet, it is almost the sunset for Buhari’s eight-year tenure and a shame that the promised national venture has been delayed this long. But it is not a time to hurriedly package a white elephant under the guise of a national carrier. Like the House committees are already doing, let all stakeholders sit down to agree on how best to handle this matter without throwing away the baby with the bath water,” Olumegbon said.