Nigeria: Pioneering Concession of State-Owned Airport

26 February 2021

The Delta State Government recently signed concession agreement and handed over the Asaba International Airport to a private investor for management. Chinedu Eze writes that this may be the key to sustaining the airport and other aerodromes owned by state governments.

The decision to hand over the Asaba International Airport to private investors by the Delta state government last Tuesday could be described as a radical departure from the past and an opportunity to sustain the airport and make it viable.

What has been common in Nigeria is where some state governments would build airports, largely out of infatuation and idealistic projections of the benefits, but narrowly to create an opportunity to airlift governors, their acolytes, the upper class and family members from their own state capitals without thinking of the continuous stream of funds that must be made available to sustain the maintenance and management of such airports.

Subsequently, some states would hit a cul-de-sac in the area of funding; then they approach the federal government and request that the airports should be taken over by the Federal Airports Authority of Nigeria (FAAN).

Sagged by such huge responsibility, FAAN with limited sources of revenue is beset with huge fiscal demands that it fails to effectively management these airports.

But the Governor of Delta state, Dr. Ifeanyi Okowa found a niche in concession and thus handed over the maintenance, expansion and modernisation of the airport to private investors. By that action, the Governor has aligned himself with modern trends of efficient airport management.

Why Concession?

The Governor during the concession agreement explained why government decided to concession the airport.

"Moving forward, we choose concession as the most viable option for the airports to be run professionally, efficiently and profitably for the overall good of the state," he said.

He also disclosed that the consortium of investors were expected to expend at least N28 billion on various developmental investments on the airport over the 30 years concession period.

Okowa further said the consortium was expected to make the payment of N1 billion to the state within 15 days of commencement of activities, while another sum of N100 million was expected from the concessionaire annually and would be escalated every five years, noting that the new arrangement would boost economic and social activities in the state.

He explained that the government concessioned the airport to FIDC-Menzies Consortium as the preferred bidder to operate as the Master Concessionaire, while others would act as sub-concessionaires for the entire concession years.

The consortium has technical partners like Air Peace as the Anchor Airline and Maintenance, Repair and Overhaul (MRO) operator, Multifreight Cargo and Logistics; for cargo and logistics centre, Arbico Construction Company; to develop the business park, hotel and convention centre, Rainoil Limited and Cybernetics Limited; to develop the tank farm and provide aviation fuel, while Quorum Aviation Limited would develop and manage the private jet and helicopter terminal.

Okowa said the airport could only be made more efficient when handed over to private investors whom he said were experienced in management of airports.

He explained that at inception, the vision of the government was to make airport a regional hub for exportation of agricultural produce for the country, but lamented that it suffered a huge setback some few years back when it was downgraded to Cat 111 by the Nigerian Civil Aviation Authority (NCAA) due to drop in standards.

He added that the concessionaire should be responsible for the management, operation and maintenance of the airport, keeping the airport in good operating condition throughout the concession period at his own cost and risk and in accordance with industry practice, and the provisions of the agreements.

Rebuilding the Airport

After the airport was downgraded by the Nigerian Civil Aviation Authority (NCAA) due to lack of safety critical facilities, the Okowa-led administration had to reconstruct the runway, construct perimeter fences, upgrade the Instrument Landing System (ILS) and other facilities, leading to its upgrade by the regulatory agency.

According to him, the new initiative by the state government had attracted new investors, new airlines, which now jostle to operate to the airport and improved economic activities for the state.

"It is the business of the Master Concessionaire to manage the airport, develop the cargo, hotel and conference centre, airlines operating into the airport and the MRO facilities among others.

"The name of the airport shall remain Asaba International Airport and there shall be no new other Greenfield airport within the concession period. Also, 20 per cent of its staff must be from Delta State and there should be mandatory capital project to be completed with the three years of commencement."

The Governor remarked that it was important that the citizens of the state were kept abreast of the new developments about the airport, "so that they know that we are truly transparent, because from day one, in all the processes, we actually have stayed on course in being transparent."

"We want our people to know that this decision is taken in the best interest of the state and the people of Delta State. And because we know that it is difficult for state governments to directly run airports and run it in the way that they should and actually bring maximum benefits to the people, we decided to go this route. And I want our people in Delta State to know that the decisions we have taken and the signing ceremony with our concessionaires today is actually in the best interest of the people of Delta State. And I hope that other states with state airports will follow suit.

"My good people of Delta with over N20 billion expected to be pumped into the airport development by the consortium over the concession period, the benefits to the state in terms of employment generation, economic growth, and tourism potential are enormous," Okowa said.

In his remarks, during the ceremony, the Chairman, Asaba Airport Company Limited, Mr. Adebisi Adebutu, assured that the management would rebrand the airport and make it one of the best within the continent.

He recalled that it all started in 2016, in line with the vision of Okowa to bring economic and infrastructure impact to the state via the airport concession. After a vigorous and transplant selection process in 2019, the FIDC-Menzies Consortium emerged the preferred bidder of the concession.

"For the sake of clarity, the Asaba International airport was initiated by the Delta State government in 2008, as part of the strategic objectives to create an economic platform to open the stage to the global marketplace.

"The airport, which has been under operational management of the state government institutions with technical support from federal regulatory agencies, was unfortunately downgraded in May 2019, due to the safety concerns identified by regulatory agencies.

"As a result, the airport maintained limited shuttle flight operations in recent years.

However, the Okowa administration in fulfillment of its responsibility to reposition the airport facility embarked on the rehabilitation of key infrastructure within the airport to resolve the regulatory identify challenges, which led to the downgrade. The rehabilitation work was successfully completed and the airport upgraded to category six by the Nigerian Civil Aviation Authority," he said.

Benefits of the Concession

Generally airports are known globally not to make run-away profits but they provide very critical service that buoys the economy of every nation and they also create jobs for the people. Industry stakeholders in Nigeria have variously frowned at the airports built by state governments because they are seen as waste of funds, as they don't provide the needed jobs and many of them operate under conditions that compromise international standard, as stipulated by the International Civil Aviation Organisation (ICAO).

But the Asaba airport has proved them wrong because since it was established it has provided essential flight service to air travellers in Delta and Anambra states. And the problem of funding the airport has been solved by the Delta state government with the concession of the airport.

The industry consultant and CEO of Belujane Konsult, Chris Alike confirmed this to THISDAY when he spoke during the agreement ceremony in Asaba.

"The benefits of the concession are multidimensional; the first is that it frees the funds the government has made expending on the airport. So that relief is immense and it is humongous given what the government has spent over the years in trying to bring the airport to what it is presently.

"Secondly, it creates an opportunity for a world-class airport, world-class infrastructure to be developed here. And the approach they have taken is the approach that has not been taken taking anywhere in the world.

"The models they have adopted is a model that will expand business opportunities, increase employment for the people, and sooner than later property rates and everything will rise in Asaba and that will be to a greater benefits of developers and those who will come into this place.

"Asaba will become a distillation as this is likely to be a gateway airport to the south-south and south east. And if and only if the federal government does not or is not allowed by all the controversies to concession all the other airports, this airport will eventually become number one airport in the country, in terms of facilities, in terms of attraction and ambience, in terms of being a destination," Aligbe said.

He said that in term of economic gains that would flow from the airport concession would be immense.

"Nobody can fully imagine it. This will be a lesson to other governors, who today, spend so much money building airports, and then turn around to hand it over the FAAN. There should be a bandwagon effect from what has happened here.

"If that happens, FAAN will be relieved of present burden of managing what today is called unviable airports. All airports can be viable if you determine how to go ahead and the only way to do it is to bring those who know how to manage airports. And that is a true concession," he said.

Competition

Aligbe also dismissed the fear that when a new airport is built in Anambra state it would reduce the passenger traffic at the Asaba International Airport, recognising that presently the airport is also the gate way to air travellers in Anambra state.

"Let me tell you, it is going to be a major problem for both airports (Anambra and Asaba). This is because after the construction of the new Niger Bridge, Nnewi will be closer to Asaba than where the new airport is located. Onitsha is closer to Asaba than to Awka. So what will determine the choice for the people is the service each airport will offer," Aligbe added.

It is also the view of many in the aviation industry that the concession of Asaba airport would provide it with enviable, efficient service that will place it above other airports in the country.

More From: This Day

Don't Miss

AllAfrica publishes around 900 reports a day from more than 130 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.