His resolve to see the emergence of a more vibrant and competitive aviation sector, capable of holding its own in the global aviation industry, has never been in doubt. However, if one of his approaches to achieving this is by floating a new national carrier, then it is doubtful if the Minister of Aviation, Hadi Sirika, will ever enjoy the support of stakeholders and experts in the industry.
This is because each time the matter comes up, following the liquidation of Nigeria Airways, 16 years ago, it’s always a subject of intense controversy, perhaps, outright condemnation by those who feel that floating a new national carrier will not be in the interest of the industry and the country generally. And Sirika, who, in recent times, has been at the forefront of the push to float a new national carrier, has been in the eye of the storm.
The Minister literarily put himself up again for scathing criticisms by concerned aviation experts and stakeholders when, last week, he said there was no going back on the Federal Government’s plans to float a national carrier. That was when he appeared before the National Assembly to defend his ministry’s budget. He said government planned to spend over N78.9 billion on the proposed national airline and other critical aviation projects in the 2021 budget.
But, as usual, the plan has not gone down well with those who are opposed to the idea of floating a new national carrier. In fact, it has forced renewed calls on the government to apply caution and, possibly, rethink its plans to float a national carrier.
From industry groups such as Aviation Safety Roundtable Initiative (ASRTI), Airline Operators of Nigeria (AON) and labour unions and other interest groups, the clamour is that government pulls the breaks on the issue.
Their argument is that global models for setting up and running airlines have moved from public ownership to privately-run enterprises so, Nigeria should not be an exemption. As far as they are concerned, government’s decision to float a national carrier is coming at a time many countries are jettisoning public ownership of airlines.
According to them, strong carriers across the globe, including Delta Airlines, United Airlines, British Airways, Virgin Atlantic, Lufthansa, Air France /KLM, are private sector owned and run entities compared to gulf carriers — Emirates, Qatar Airways and Etihad Airways— which are owned by the government.
To further drive home their point, they said in Africa, a few of the government-owned and run carriers – South African Airways, Kenyan Airways, Egypt Air, Ethiopian Airlines, Royal Air Maroc and RwandAir- were struggling.
Perhaps, more worrisome to them is the N78.9 billion government said it planned to splash on the proposed national carrier project, among other critical projects in the 2021 budget.
Government, in its 2021 Appropriation Bill to the National Assembly, also plans to spend N14 billion on the construction of the second runway for the Nnamdi Azikiwe International Airport (NAIA), Abuja and 10 new airports across the country to boost civil aviation.
It also plans to build seven new airports in Anambra, Benue, Ekiti, Nasarawa, Ebonyi and Gombe states, in addition to taking over airports in Kebbi, Osubi, in Delta State and Dutse Airport in Jigawa State.
The huge capital outlay involved in these projects, analysts say, does not make economic sense at a time the government is experiencing lean resources coupled with downtime in global aviation.
In the 2020 budget, the Ministry of Aviation proposed to spend over N4.6 billion as working capital on the national carrier project, which has been in limbo since October 2018.
The development, which has triggered confusion in the sector, was again ignited by an appropriation bill sent to the National Assembly by President Muhammadu Buhari recently, where the ministry proposed to pay N250 million as “consultancy fee” for the establishment of the national carrier.
Investigations by The Nation reveal that government had proposed to spend N6.7 billion on the aborted national carrier project in the last two years, with N5.6 billion set aside as “ongoing” sum for the project and another N554 million as “consultancy”.
Although the Federal Government unveiled the controversial national carrier at the Farborough Air Show in the United Kingdom on July 18, 2018, the project was suspended by following a series of unanswered questions bordering on equity structure, alleged lack of transparency, aircraft acquisition deal, and incomplete incorporation of the airline company, among others.
Before the temporary suspension of the project in October 2018, the government had scheduled the airline to begin operations on December 24, 2018, with a target of 81 routes covering local, regional and international operations.
The government also planned to lease 15 aircraft, though the airplane types were not disclosed as its promoters consolidated plans to acquire additional aircraft under its fleet ownership to 30 airplanes within three to four years.
Sirika, who pilots the project, said government was expected to spend $55 million on it in 2018, $100 million in 2019, while $145 million was expected to be expended on the project in 2020. According to him, government had planned to spend over $300 million on the airline project in three years.
While industry experts and players raised concerns about the equity structure of the project, Sirika said government would not own more than five per cent of the airline, which he put at $55 million. He said government would not interfere with the recruitment and appointment of technical persons and management of the new airline as agreed with the Infrastructure Concession Regulatory Commission (ICRC) guidelines.
According to the ministry, “This funding can be in the form of equity or debt. In order to ensure take-off of the airline in 2018, the government will provide $55 million upfront grant or viability gap funding to finance start-up capital and pay commitment fees for aircraft to be leased for initial operations and deposit for new aircraft, whose delivery will begin in 2021.
“The company’s shares will be sold through an Initial Public Offering (IPO) after which the government will own five percent equity. Government’s equity share held in trust for Nigerians will be devolved to Nigerians via an IPO.
“The government will retain only five percent equity, the list of shareholders then will be available to the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange.”
But, Sirika’s explanations may have failed to sway those vehemently opposed to the proposed new national carrier, with many of them calling on government to jettison the idea, and, as a matter of urgency, embrace fashionable models obtainable in other countries.
Some experts, who spoke with The Nation, said government, as aviation sector regulator, had no business in setting up an airline. Rather, it should encourage private sector investors by creating a more conducive environment for them to do their business.
For instance, the immediate past Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison, said the government had no business setting up a national carrier. What government should do, he said, is to empower existing private sector airlines as flag carriers who will represent Nigeria in the international arena.
According to the former leader of the umbrella body of indigenous carriers, the government should empower existing domestic carriers by reducing multiple aeronautical and airport charges to enable them actualise the bilateral air services agreement it signed with many countries.
Listing Air Peace, Overland Airways, AZMAN Air, Aero Airlines, Arik Air, Dana Air, Medview Airlines as carriers designated on international routes, Meggison said such carriers should be encouraged to reciprocate Nigeria’s bilateral air services agreements on such international routes rather than push for a national airline.
Meggison said government needed to step up its support for carriers including Air Peace, which operates on the Lagos/Sharjah/Dubai route and its plans to open up the Lagos- Johannesburg route, as well as the Lagos-London, China, and U.S routes, to strengthen their operational capacity rather than struggling to set up a national carrier.
Without mincing words, Meggison said: “At this time when the country is experiencing limited national resources, floating a national carrier is not ideal. National carrier is an obsolete idea. Business and pride don’t go together.
“All over Europe, South America, and the United States today, 90 per cent of their carriers, including Lufthansa, British Airways, are flag carriers which are completely private entities.
“Nigeria does not need a national carrier. Like what operates in advanced countries of the world, what Nigeria needs are strong private airlines that are allowed to operate in a friendly operational environment with a level playing field and policies that ensure their survival.”
Similarly, the Executive Director, Aviation Development Initiative, Babs Yusuf, urged the government to rethink the idea of floating a national carrier. According to him, it’s no longer fashionable.
“What is the sense in implementing a national carrier at a time of lean resources and downtime in global aviation? What is the lure for Nigeria, given our antecedents with such business ventures? Yusuf asked, pointing out that “national carriers are no longer fashionable. Besides, credible investors are scarce.”
Continuing, Yusuf asked: “Is this (national carrier) not another white elephant project? What is wrong in government retaining its regulatory role, improving the toxic business environment and supporting private business to grow and fill the vacuum?”
On his part, the former Director of Human Resources at the defunct Virgin Nigeria, Victor Banjo, said the project fell short of requisite structure for success.
Similarly, the President, Sabre Travel Solutions, Gbenga Olowo, said government should empower existing flag carriers rather than dissipating energy and resources in setting up a national carrier.
Olowo said existing flag carriers should be supported through policies that enable them to forge alliances as global players. “This is easily achievable through economic policy of cooperation, collaborations, mergers and acquisitions,” he said.
On his part, the Chief Executive Officer, African Aviation Services Limited, Nick Fadugba, said although the idea of a national carrier was welcome, but for it to succeed it needs a sound business plan, strategic industry partners, and adequate funding.
Other success factors, according to him, include experienced management team, well-trained staff, a fleet of modern aircraft, comprehensive route network, on-time performance, good customer service and non involvement by government.
The Chairman, House of Representatives Committee on Aviation, Nnolim Nnaji, said Nigeria needed strong flag carriers to enable it play on the continental sphere.
Nnaji expressed worries that the country had remained passive in the continental aviation market in recent years despite its huge daily passenger traffic.
However, he said floating a fully government-owned airline may not be an alternative According to him, the committee will work closely with the Federal Government to ensure that competent local airlines are supported to assume the status of flag carriers and operate internationally.
But, the Chief Executive Officer of Kitari Consult Limited, an aviation consulting firm, Mr Ali Magashi, holds a contrary view. He said he was in support of the establishment of a national carrier. According to him, a national carrier could be used to promote the country’s brand to the world.
He said a national airline was like an embassy with wings, transporting its country’s talents, skills, commerce, culture, cuisine, human resource and goodwill around the world. “Conventional wisdom suggests that developing countries with small economies and high growth potential invest in national airlines.
“Dubai and Singapore have successfully made their airlines their main brands, driving their national identity and growth strategy, and so have Ethiopian Airlines and EgyptAir done here in Africa,” Magashi said.
The aviation expert added that among other benefits, a national carrier run efficiently would reduce the country’s transport infrastructure deficit, help in the development of the economy and provide multiple jobs, as well as help in developing aviation leasing companies, maintenance hangars, flight simulators and related training facilities.
He also said it would stimulate the development of more travel agencies and the hospitality industry, and bring about economic empowerment to many people through forward linkages in aircraft leasing and finance, and backward linkages of hospitality and air travel support.
“The aviation industry supports about 62.7 million jobs around the world. As such, a national carrier airline will help in boosting economic activities and stimulation,” Magashi said.