19 March 2018

Nigeria: Planned National Carrier - Racing Against Time

Nigeria had a national carrier-the Nigeria Airways-that was run aground by corruption. A former President, Olusegun Obasanjo, eventually liquidated the airline in 2004 in a weird circumstance that has left experts trying to deconstruct the rationale behind the liquidation when the airline could have been concessioned or privatised based on its huge assets despite its liabilities.

Indeed, establishing a national carrier for Nigeria is a key campaign deliverable of the President Muhammadu Buhari-led government. He hasn't minced words about this either.

Therefore, even before ministers where appointed, President Buhari had directed the then Permanent Secretary, Ministry of Aviation, Hajiya Binta Bello, to inaugurate a ministerial committee on the establishment of a national carrier.

The committee had a former Managing Director of Discovery Airlines, and now Rector, Nigerian College of Aviation Technology (NCAT), Zaria, Captain Mohammed Abdulsalam, as chairman. It was charged with reviewing previous submissions and recommendations on a national carrier, reviewing the report on the failure of the defunct Nigeria Airways and other failed private airlines.

The committee which was set up in august 2015 has since turned in its report.

In an exclusive conversation last year with Daily Trust, Capt. Adbdulsam gave insight into what his committee told the president in their recommendations.

He said his committee's recommendation was definite about the prospects of a national carrier but that it must be private-sector driven.

Capt. Mohammed also agreed that the liquidation of Nigeria Airways was ill advised, thus a national carrier must return if Nigeria must maximise economic benefits from aviation.

These benefits are in addition to the fact that a national carrier or even a flag bearer will benefit from the bilateral air services agreement Nigeria signed with other countries. Currently, most of those routes are being enjoyed by foreign airlines without a reciprocal benefit by Nigeria.

Most recently, there was also a publicised leverage of Single African Air Transport Market (SAATM) by the national carrier, when it comes into effect.

On the national carrier model, Capt. Abdulsalam said the committee was also definite about a private-sector driven national carrier, but a very low equity holding by government.

However, the entire 2016 didn't see any significant progress on the road to re-establishing the national carrier. Perhaps, government was still finding its feet and getting around the system.

The major activities around the establishment of the national carrier began in 2017. The first concrete step only began around May 2017 when the government appointed six firms; including German carrier, Lufthansa, to advise it on setting up the national carrier.

A Federal Executive Council (FEC) meeting chaired by Vice-President Yemi Osinbajo approved N1.52bn ($4.99m) of funding for the project, Sirika told reporters after the FEC meeting.

Fast forward to February 2018, about nine months after the transaction, advisers were announced, rather than get a clear business case, Nigeria woke up to an announcement by government that one of the consultants, Lufthansa Consulting, was removed from the list over conflict of interest. The removal was sequel to a memo presented to the FEC by Hadi Sirika.

Technically, not much has been achieved all this while. Mr. Sirika, while briefing state house correspondents, said FEC approved the substitution of Lufthansa Consulting with another company, AMG (Airline Management Group). Also, that Avia Solutions GE would join the other members of the consortium to continue providing the same service. The six advisers are Lufthansa (now replaced by AMG), Avia Solution GE, Arrow for concessioning of airport and Aerotropolis, Infrata for maintenance repairs overhaul (MRO) and JEBB for cargo terminals.

Shortly after the recomposition of the transaction advisers, the minister also announced the first major timelines for the project delivery, something that has not happened in the over two years the government struggled to set up the national carrier.

Sirika told journalists in Lagos recently that March, 2018, was the deadline for the outline business case to be ready and that the national carrier would fly Nigeria's flag before May 29, 2019.

Indeed March is here and the clock is tickin as Nigerians await a clear direction this time around from the government.

But as exciting as this bit of information may sound, from March when the business case would have been ready, all things being equal, and May 2019, when the life of this government will be ending, its just 15 months away.

In between this time, the entire architecture of the national carrier will need to be concretely established. Investors will need to be wooed, licences procured for the national carrier and bidding would have to happen for the national carrier to come into effect, if it must be private-sector driven and under international best practice. Industry watchers are worried that the timeframe is short for a thorough job to be done and Nigerians can't afford not to get it right now on the national carrier as the consequences will be catastrophic on the industry. Of course except the investors and financiers have kept monies waiting to be deployed into the national carrier, it's indeed a tall order to make it happen in this tenure. Nigerians will also not forgive the government if due process is subverted.

An aviation expert, Group Capt. John Ojikutu, is also not excited about the progress gained even though he is excited about the national carrier.

He said if up till now there was no concrete information from government as to the modalities of the national carrier or flag carrier, it was indeed worrisome.

As it stands now, Nigerians are waiting with baited breath to hold the minister and indeed President Buhari to account for their promise to deliver the national carrier to Nigerians in the life of this government.


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