The Federal Government may have inched closer to actualising its plan to float a national carrier, following the emergence of Ethiopian Airlines as the carrier’s preferred bidder, with 49 per cent stake. But despite what appears to have signalled a smooth take off of the project, controversy around the alleged opaqueness in the criteria for selecting the core investor/technical partner remains, fuelling fears that the project may go the way of others before it. KELVIN OSA-OKUNBOR reports.
Controversy has continued to trail the newly unveiled national airline – Nigeria Air. Even with the emergence of Ethiopian Airlines as the carrier’s preferred bidder, signalling, perhaps, the eventual take-off of the project, the selection of Ethiopian Airlines, an African carrier allotted 49 per cent stake in the project, has thrown up another controversy in the aviation industry.
At the centre of the controversy, according to some experts and operators, is the Federal Government’s decision to cede 49 per cent stake in the proposed national carrier to Ethiopian Airlines, which is a competitor in Nigeria’s huge air transport market. Those who understand the ownership structure described it as “a disservice” to the efforts of indigenous carriers.
Specifically, they queried whether Nigeria, a country with over 200 million people, needs another African country to deliver an airline for it. Besides, given Ethiopian Airlines’ intimidating inroads into the Nigerian market, where it operates into five Nigerian cities – Lagos, Abuja, Kaduna, Kano and Enugu- they argued that offering it a deal to partner for a national airline could be counterproductive.
The Federal Government had on September 23, this year, announced Ethiopian Airlines as the preferred bidder for the Nigeria Air Project with 49 per cent stake. The African carrier was named alongside three Nigerian investors: MRS, Skypower Aviation Handling Company (SAHCO) and the Nigerian Sovereign Investment Fund (NSIF) with 46 per cent stake, while the Federal Government owns five per cent.
Minister of Aviation, Hadi Sirika, explained that the investors were subjected to due diligence, after which the contract would be negotiated between the consortium and the Federal Government, leading to a Full Business Case, which would be expected to be approved by Federal Executive Council (FEC). He said the process was expected to take about eight weeks.
The Minister explained that the share capital of about $300million would be provided by the preferred bidder, which would launch Nigeria Air to its full size of 30 aircraft and international operation in the next two years. He said apart from the five per cent share investment by the Federal Government, no further funding would be provided.
Sirika said Nigeria Air will be launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market and will launch with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between these two major Nigerian airports. Other domestic destinations would, however, follow.
He further said a signature-ready contract had been finalised with Ethiopian Airlines for the three Boeing 737-800 with a 16 Business Class and 150 Economy Class configuration.
Sirika said: “All executives have been approved by the Nigerian Civil Aviation Authority (NCAA), which has issued an Air Transport License to Nigeria Air.
Having identified the first three aircraft, the new carrier would finalise the Operation Manuals and, then, go through the inspection and approval of NCAA. “The money spent for the launch of Nigeria Air, for all the requirements to establish an Air Operating Certificate (AOC) and be admitted to start an airline operation is well within the five per cent capital investment of the Federal Government of Nigeria,’’ Sirika said.
He said this would be the investment needed to establish the National Carrier initially for the AOC approval and everything else required by stringent national aviation regulations, as prescribed in the FEC-approved Outline Business Case (OBC).
“This OBC is the milestone for the preferred bidder consortium and has been met by the submitted business plan of the preferred bidder. It is the overall share capital of around $300, (million) provided by the preferred bidder that will launch Nigeria Air to its full size of 30 aircraft and international operation within the next two years.
“No further Federal Government of Nigeria’s funding will be provided above the five per cent share capital of the next national Carrier of Nigeria, which was provided to launch Nigeria Air,” the Minister explained.
Questions over Ethiopian Airlines’ selection
However, a day after the Federal Government announced the preferred bidder for the proposed national carrier, Nigeria Air, with MRS, SAHCO and the Nigerian Sovereign Fund as Nigerian investors, the Ministry of Aviation removed the NSIA as an investor in the project.
The Special Assistant (Public Affairs) to the Minister of Aviation, James Odaudu, said the inclusion of the NSIA as an investor in Nigeria Air was an error. “Our attention has been drawn to the inadvertent inclusion of the NSIA as part of the private investors in the Nigeria Air project.
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“We wish to clarify that the Authority is not involved, in any way, as part of the private equity ownership of the airline, being a government establishment. It should be noted that the NSIA was not mentioned in the Minister’s presentation, but only in the general brief given to the media, an error made during its preparation,” Odaudu said, in a statement.
He further said: “For the avoidance of doubt, the equity ownership structure of Nigeria Air stands as: Ethiopian Airlines, 49 per cent; Nigerian private investors (SAHCO, MRS and other institutional investors), 46 per cent and the Federal Government, five per cent.The public, especially the business community and the media should please take note.”
However, some keen observers and experts appear not convinced by Odaudu’s explanations. To them, the removal of the NSIA as an investor in the project was part of the alleged opaqueness associated with the national carrier project.
They noted, for instance, that the action was enough indication that the government may have hurriedly packaged the project without recourse to due process.
An aviation analyst, Prof. Anthony Kila, wondered if Ethiopian Airlines is a technical partner or investor. He said: “We are wondering about things we should not be wondering about because the contour, the promoters of the venture, should have been upfront in releasing information. At this moment, there are more questions than answers.”
A former Chief Executive Officer of one of the aviation agencies, who spoke on the condition of anonymity, also said: “Everything is shrouded in secrecy and a lot of enigmas. So, it makes it very difficult to comment on.”
For the former President, National Association of Aircraft Pilots and Employees (NAAPE), Isaac Balami, the planned national carrier would have been more beneficial if Nigeria had owned over 80 per cent of the airline.
Balami said: “I would have wanted this thing to be at least 80 per cent Nigeria-owned. As it is, the largest chunk of the stake is going to a country and an airline that, ordinarily, should be under us or we should be ahead of them.
“I just pray that one day we would correct the wrongs and get Nigerian businessmen that would look inward and invest and not allow foreign airlines to come and take everything out of this country. I don’t know the nitty-gritty, I have not gone through the contract, but anything that is not going to empower Nigerians is not good enough.”
Also, Group Capt. John Ojikutu (rtd), expressed reservation with the choice of Ethiopian Airlines as a core investor.
He said: “First and foremost, I am not in support of having any foreign airlines and a competitor with us on the Bilateral Air Services Agreement (BASA) routes as our technical partners.The foreign airline’s interest in the partnership comes before ours.
“Secondly, similar partnerships with the KLM and the SAA in the early 90s did not benefit us. We should, therefore, look for partnerships outside the competitors in the BASA routes in countries like Canada, Australia.”
However, there are some people who don’t see anything wrong in the choice of Ethiopian Airlines. For instance, economist and Chief Executive Officer, Sabre West Africa, Dr. Gbenga Olowo, said there was nothing unusual in the government unveiling Ethiopian Airlines as preferred bidder for the project, as the speculation has been in the air for some time now.
Olowo, who is also President of industry think tank group – Aviation Safety RoundTable Initiative (ASRTI), said Ethiopian Airlines could be a good partner to birth a national airline for Nigeria.
“My position remains the same. Since the issue of Air Nigeria has been laid to rest, given government’s insistence to do so, my endorsement is based on the need for the success of any new start-up airline in Nigeria,” he said.
Olowo said it is, especially advantageous for Air Nigeria to partner Ethiopian Airlines as a competitor on Nigeria’s BASA for the simple purposes of Code Share Agreement (CSA) and Blocked Seat Agreements (BSA) outside the airline’s intended direct services.
Continuing, the aviation expert said: “The merits of cooperation and collaboration will more than outweigh that of competition, provided the management is on top of its game. Nigeria Airways, in the past, operated to many countries, not directly but by commercial agreements.
“That is not all, interlining and global alliances, which is a necessity in today’s aviation, comes with ease given this partnership rather than the airline struggling on its own for relevance and partnership for route expansion and penetration purposes.
“The robust maintenance facility of Ethiopian Airlines and its varied fleet will be very helpful to the young airline. Manpower training and personnel exchanges would be another benefit.
“Ethiopian Airlines as an African partner is inward-looking and it’s very good for the implementation of the Single African Air Transport Market (SAATM) under the African Continent Free Trade Agreements (AfCFTA).
“Without any intention of being the brand manager for this project, it is my call to salute any good decision be it by individual operator or the government.”
Olowo added that the only caveat, which has been printed repeatedly, is that the five per cent of the government ownership, which is the country’s commonwealth, might not be necessary after all, since the government is midwifing a privately owned airline.
“It is a general contention that the government has no business in business due to incessant political interferences. It is also expected that the carrier is not treated as a “mere flag carrier” than others already flying the flag, including Air Peace and one-time Arik.
“I want to discountenance the national carrier nomenclature as no single airline can quickly and easily reciprocate BASA belonging to Nigeria. Two or three strong airlines are desirable.
“The playing field must be levelled for all flag carriers in the interest of Nigerian aviation. This is the voice of a solution provider rather than a mere critic. I will encourage the airline operators, aircraft operwators, and interested stakeholders and associations to endeavour to buy the 46 per cent remaining shares available to the public,” Olowo said.
Some Nigerian passengers, including Mr. Dotun Adekole, align with Olowo. Noting that the government is not meant to run businesses anymore, the concern should be about who can do the job and ensure the safety of Nigerians, as well as see how they can make profits off the venture.
“It makes no sense for the government to be wasting public funds on an airline.
‘’Ethiopian airlines have the capacity. Instead of the government adopting one of our airlines in Nigeria and upgrading it to a national carrier, they prefer accepting Ethiopia. The biggest shame is that no one bided,” Adekole said.