Saturday, August 13Inside Business Africa

Stakeholders demand transparency as FG, investors pump N170.5b in new carrier

• Carrier racks up N58b ‘working capital’ in three years
• Govt already managing three airlines through AMCON, says Olumegbon

About three years after its unveiling in London, United Kingdom, and subsequent suspension, the Federal Government is having another go at the new national carrier project with an estimated sum of N170.5 billion already on the table. The sum, contributed by both private investors and budgetary provisions in the last three years, is expected to start up the new airline next year.

Findings by The Guardian showed that private investors have pledged at least $250 million (N112.5 billion), while government’s allocations in the form of “project working capital” between 2019 to 2021 have added up to N58 billion ($128.8 million).

Aviation stakeholders are, however, worried about the lack of transparency in the prolonged build-up to the new venture, coupled with its viability and sustainability in a pandemic era. The worry is not unconnected with the venture’s ability to attract 90 per cent of investment from both local and foreign investors, coupled with a credible technical partner to drive its operations at a time when global aviation has recorded multiple airline collapses and losses to the tune of $90 billion in 2021 alone.

The Federal Government on July 18, 2018 unveiled the name and logo of the proposed carrier at the Farnborough International Public Air show in London. That was ahead of the planned initial take-off on December 24 of that year. The lack of budgetary provision, and scathing criticism by the public forced the Minister of Aviation, Hadi Sirika to “temporarily” ditch the rollout plan in 2018.

Before the suspension, the government had scheduled the carrier to commence flight operations on December 24, 2018 with a target of 81 local, regional and international routes on commencement of operations, 15 leased aircraft as at the due date with additional plans to own 30 planes within three to four years.

Sources at the Ministry of Aviation said that the project was never jettisoned. A senior official recently said the project remains on course, adding that the initial problem was that of funding.

“I think that is getting solved now as the project is getting the attention it required from the government. Before long, we will advertise, invite bidders and begin rollout. We already have some money, but I cannot say how much,” the official said.

Sirika had said that the project, among others contained in the aviation development roadmap initiative, remains a priority, which earned it a place in the 2019 budget. The project got a capital vote of N47.3 billion.

In the 2020 Appropriation Bill, the Federal Government proposed to spend N4.69 billion as working capital for Nigeria Air. The government also proposed to pay the sum of N304 million as consultancy fee. The 2021 fiscal plan only provided N1 billion under the “working capital for establishment of national carrier.”

Meanwhile, the carrier got a top priority in the N27 billion aviation bailout lump sum to cushion effects of the COVID-19 lockdown. Of the sum, the national carrier got N5 billion vote.

The total sum of N170 billion (that is, $250 million from private investors, and N58.5 billion or $128.8 government vote) already generated, has exceeded the sum of $300 million (N135 billion) originally planned for the project and approved by the Infrastructure Concession Regulatory Commission (ICRC).

The national carrier is intended to replace the defunct Nigeria Airways that ceased operations in 2003. The replacement was designed as a Public-Private Partnership (PPP) project with the Federal Government likely to own as much as 10 per cent stake.

Sirika earlier said that the venture was expected to gulp $55 million in 2018; $100 million in 2019, and $145 million in 2020. In three years, the government had planned $300 million for the airline project.

Reacting to the minister’s recent disclosure that the new carrier will now take off in the first quarter of 2022, travel consultant, Sunday Olumegbon, said it was unfortunate that what started as a good initiative has become “a plaything or pet project” of the minister.

“I think we should ask; is it a national carrier or a government-owned airline? Because, I don’t understand this pause and play approach. We have had about four proposed takeoffs till date. No one runs or sets up a national venture in the manner in which the minister, an aviator, is going about it. How come we have no coherent national aviation plan that makes the national carrier and private airlines complimentary?

“I think the best way to start such a mega venture is to first create the enabling environment for all airlines to thrive. Without addressing the toxic business environment that is killing private airlines, setting up a new national carrier is going to be a wild goose chase.

“Let’s us assume that the carrier flies, how many airlines will the government own? Don’t forget that the Asset Management Corporation of Nigeria (AMCON) currently owns Arik Air, Aero Contractors, and another one is coming, NG Eagle. Where is that done? The government needs to get real. Sustainable businesses abhor such tardiness and lack of clarity,” Olumegbon said.

Secretary General of Aviation Safety Round Table Initiative (ASRTI), a think-tank group of the industry, Group Capt. John Ojikutu (rtd), said the lack of transparency in the build-up was worrisome.x

“If N102.7 billion or $250 million is what the investors would raise for the national carrier, how much is government’s investment and how much for the private investors, or what are the percentages of each investment in this if we assume the amount is the initial capital investment? What materials or number of aircraft are we expecting from the $250 million?

“These are the questions to ask before the takeoff. When well answered, we takeoff, otherwise, we remain on the ground as we have been for two years. If well answered and we take off, the investors well defined, ‘aircraft to purchase’ known in numbers, then we should be ready to land in the first quarter of 2022, which is about 10 months from now.”

Ojikutu had expressed disappointment on how the project has stalled in the last three years. He said up till the beginning of 2020, he had no reason to think that the formation of the national carrier was not possible, “if we, as a people, not a few individuals in government, know what we are looking for.

“We need a national carrier not a government airline. We must bring every Nigerian onboard both in and outside the country. In my post to the Minister, I said it should not take more than six months to get it established. The COVID-19 pandemic has now become the alibi to every failure in aviation, including the failures that predated the pandemic.

“It will take as many more years as it would take existing airlines to make up for pre-COVID-19 passenger traffic, for anyone to begin thinking of establishing any new airlines, be it private, public or national, except a cargo airline,” Ojikutu said.

INDEED, the COVID-19 pandemic has brought a tumultuous period for aviation, with 23 airlines collapsing due to the international travel restrictions introduced to curb the spread of the disease. The biggest losses have included Flybe, a UK domestic airline that operated since 1979, and Virgin Australia, which came into existence 20 years ago.

Some other big players are showing signs of struggle. Emirates Airlines has said it will cut 30 per cent of staff as a result of the pandemic, with 1,600 pilots sacked since May. Thousands of British Airways staff is at risk of redundancy. The American airline industry is “likely” to lose a carrier to this pandemic, according to Boeing president and chief executive David Calhoun.

Among the airlines that have collapsed are South African Airways in South Africa, Air Georgian in Canada, Air Italy in Italy, Air Deccan in India, AtlasGlobal in Turkey, Avianca in Peru, Compass Airlines in the United States, Ernest Airlines in Italy, and LATAM in Argentina among others.

Aviation Consultant, Chris Aligbe, had also expected that Nigeria Air would have taken off much earlier, even before the COVID-19 induced economic crisis. Aligbe, however, insisted that the country’s aviation sector needed a formidable carrier in the status of a national carrier to go farther than any private carrier could do.

He said despite the paucity of global investors, the airline project was an opportunity for investors that would be ready to take the risk. “I believe that the national carrier is still possible. But with the pandemic, it means that we have to start reviewing the project plan to align with the new realities.

“I am aware that a lot of airlines are doing away with the 747 four-engine aircraft, except for the A380s that some airlines still use. It means that we too have to start small. Where there was a plan for 20 wide-bodied aircraft before, we can start with about five single aisle aircraft of not more than 200 passengers. It will enable the operation for about two years before the market normalises.

“Again, instead of having technical partners with equity, we can start on the level of partnership arrangement with a formidable airline with an option of equity. That was how Kenya Airways operated with KLM. We can do that too, and review after about two years of operation, considering about 30 per cent of equity. For me, there are more opportunities with this pandemic as a lot of fairly new aircraft are all over the place for buyers and at cheaper rates,” Aligbe said.

Source: Guardian

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