Revisiting The National Carrier Debacle

IT has, for years, worked as some sort of validation of an enigmatic theory that whatsoever the Nigerian government puts its money in goes comatose. In the aviation industry, the rise and fall of the Nigeria Airways and the experimentation with Virgin Nigeria airlines, paints a bad picture — the State has almost never got things right, it would seem.

But the Buhari-led Federal government’s recent charge to officials of the Ministry of Aviation to set modalities to resuscitate a national carrier for the country, many expect, may serve as an elixir for the industry. The order, already, has sent ripples round the industry, and stakeholders, though divided, advocate a more pragmatic approach to the matter.

A document, which is an internal working paper for a committee of industry-experts, exclusively obtained by The Guardian, reveals that stakeholders prefer that government should either “flag a mega carrier, which could come from a benevolently-forced merger; consolidation of assets of leading private airlines or an outright start-up of a PPP-based national carrier.”

It said the priority for setting up a national carrier should be to create employment for Nigerian pilots, aircraft engineers and crewmembers, a move that has the potential to employ about 50,000 people.

The document reads in part: “Stakeholders are divided on this issue. While some believe, for good reason, that only a government driven private sector-led national carrier is the only way for Nigeria to establish a mega carrier that can have global relevance and competitiveness, others argue that such step will be retrogressive, pointing to the circumstances that led to the demise of the defunct Nigeria Airways.

“The former group believes, as attested to by most, that the liquidation of the then National Carrier, Nigeria Airways, is the bane of the industry, noting that the singular action truncated the growth of Nigeria’s airline operations performance. While the latter, on the other hand, points to the involvement of government in the national carrier as the reason d’état of the crisis ab-initio.

“However, all agree that Nigeria needs to urgently establish a mega carrier. Whether through benevolently forced merger, or through consolidation of assets of leading private airlines into a national carrier, or an outright start up of a PPP-based national carrier, stakeholders agreed that there should be no further delay.”

According to them, the full and final settlement of severance benefits of the ex-workers of Nigeria Airways cannot be a condition for the establishment of a new national carrier under any arrangement.

The stakeholders’ resolve is in line with moves, over the years, by government to introduce a national carrier after several failed attempts, the last of which was a stillborn experiment with Aero contractors.

The plans hit the rocks because, according to the immediate past minister of Aviation, Mr. Osita Chidoka, all of the airlines currently operating domestic flights are privately owned. A national carrier, he argued, must have a diverse ownership structure.

On the plan invovling Aero Contractors, Chidoka said the attempt in 2011 failed because the minority shareholders refused to agree to restructure the ownership, stressing that Aero was chosen at the time because of its indebtedness to the Federal Government through Asset Management Company of Nigeria (AMCON). Other reasons advanced were its safety records, the size of fleet, operational coverage and availability of electronic ticketing.

He said: “The airline (national carrier) should not be a family business operated by one man and his children. Private investors should have equity in the business; the books must be open for scrutiny and auditing and there must be transparent financial dealings and agreeing to restructure the ownership through the sale of shares on a 60/40 basis.

“The airline must have a strong and reliable technical partnership that will constantly guide it on the path of safety and profitability. This must be accompanied by International Air Transport Association (IATA) International Operational Safety Audit (IOSA) certification, which is done periodically. The airline must have the right fleet size in order not to put unnecessary pressure on few air planes, which will lead to quick wear and tear.”

He said the ministry’s panel set up to look at the viability of a national carrier advised that Nigeria explore the multiple carrier option instead of a single national carrier.

For standards, Chidoka said for an airline to qualify as a national carrier “it must have International Air Transport Association (IATA) and International Operational Safety Audit (IOSA) certification, it must have evidence of technical partnership and must meet minimum criteria for fleet size, equipment and diverse ownership.”

But the debate has always been contentious, following the controversial liquidation of the foremost national carrier, Nigeria Airways — managed at different times by KLM and South African Airways and said to have had about 30 aircrafts at a time. It closed shop in 2003 on grounds of indebtedness, a decision many describe as a deliberate plot to rob the country of its expansive, juicy real estate around airports in Abuja, Lagos, Port Harcourt and Enugu.

But, today, many private airlines groan under the weigh of debts in operating costs, even with an N300bn Central Bank of Nigeria (CBN) subvention.

About three years ago, Asset Management Corporation of Nigeria (AMCON) absorbed more than N132bn of debts from 12 Nigerian airlines including the biggest carriers, Arik, and Aero.

Also, British billionaire Richard Branson went in conjunction with the Nigerian government to set up a domestic and international carrier, Virgin Nigeria in 2000, but was frustrated out of the arrangement in 2010. Branson was later to ascribe his exit to “interference by politicians and regulators.”

Virgin Nigeria was later rebranded Air Nigeria, and closed shop in 2012 after it was unable to pay staff and ran into debts valued at about N35bn.

However, proffering ways Nigeria could overcome what is now perceived as a debt-ridden industry and get maximum benefits, the Chief Executive Officer (CEO) of Aeroconsult Limited, Engr. Babatunde Obadofin, in an interview, urged government not to inject money into a national carrier project, but rather implement policies that would see Nigerian airlines operate with minimal costs.

Some of these policies, according to him, include designating a single port of entry for foreign airlines, stimulating the setting up of maintenance facilities within the country and mandating government officials to patronise domestic airlines when on international and national assignments.

He said: “Many of us in the industry believe that what the country needs is a flag, not national carrier. Government should designate an airline bearing a Nigerian flag to fly to other countries. For instance, we have British Airways and Virgin Atlantic coming into the country from the United Kingdom (UK). I do not know the modalities government wants to adopt, but I advise that they only provide a platform to put things together.

“The prospects of a national carrier is feasible, but is it sustainable, given the circumstances? What is the strategic plan for the enterprise? We have always had governments come in to disrupt things, which was the bane of Nigeria Airways.

“I won’t advise government to pump in money into the venture, because if it does, it would seek control. And when that happens, the enterprise has failed. Government would always seek to protect its interest.”

He said it is good for government to ensure that the domestic airlines grow and develop capacity for competitiveness, as the subsisting policy was inimical to growth.

“Government must formulate policies that address cost elements in the industry, including fuel, maintenance and allow for tax holidays for airlines. Airlines incur debts not just because of poor management but because government policies might not be so soothing. Airlines can only work with what they can get from the environment. How does airlines manage during fuel crisis when government doesn’t step in,” he stated.