REVIEW: Investors’ Apathy Drags Airport Concession Pace

The renewed bid to concession four international airports appears to have run into troubled waters. Beyond the search for shy foreign bidders, the government needs to work on its reputation at home and clear outstanding ‘mess’ to rekindle investors’ confidence.

Signs of cracks in the plan to concession four international airports emerged recently when the Federal Government advertised an extension in the timeline for the submission of bids for their takeover.

The undercurrent, The Guardian learnt, was due to the poor turnout of credible bidders in the plan to transfer ownership and turnaround fortunes of the ports of entry.

Perhaps the concession handlers overrated private sectors’ interests in the mega project, to warrant exclusion of all State governments from the bidding process. But beyond buying time, stakeholders said the move was ab initio flawed and a hard sell without concise efforts to address booby traps in the aviation sector.

Specifically, they said the government’s laid-back disposition to address the pending debt crisis and rash of existing concessions around those airports should scare any genuine investor. Most worrisome was the yet unresolved fallout between the Federal Airports Authority of Nigeria (FAAN) and Bi-Courtney Aviation Services Limited (BASL) over concession of Murtala Muhammed Airport Terminal two (MMA2) – the first of such concessions in Nigerian aviation – which readily hang a credibility dark clouds on the government.

Still open for business
The six-year-old agenda to get the international airports up and running gained a belated boost with the invitation of bidders for Lagos, Abuja, Port Harcourt and Kano ports of entry.

The request for qualification (RFQ), to run the facilities efficiently and profitably, is open to firms or consortia with track records in airport terminal management and net worth of N30 billion per bidding firm or consortium. The concession is billed to run for 20 to 30 years tenure in a Build, Operate and Transfer (BOT) model.

In an addendum published by the Ministry of Aviation last week, the Permanent Secretary, Hassan Musa announced the extension of the deadline by four weeks, now ending on October 25, 2021.

He cited: “the number of enquiries arising from our earlier advertisement from both local and international parties interested in the concession programme.”

But the toll of grey areas appeared to ring the loudest in the process and sought more than a passing interest.
Unresolved FAAN/BASL tango over MMA2

Most disappointing for stakeholders is the current status of the premiere PPP venture in the sector – the Murtala Muhammed Airport two (MMA2), Lagos – built and operated by Bi-Courtney Aviation Services Limited (BASL).

It would be recalled that the old domestic terminal (now MMA2), like all other terminals, nationwide used to be managed by FAAN until fire razed it in May 2000. Government of the day considered the cost of replacing the facility too burdensome and opted for private investors that could shoulder the weight under a Public-Private Partnership Scheme.

The plan completely transferred all development and operating risks to the private sector, specifically on a Build-Operate-Transfer (BOT) arrangement. The venture is the first of its kind in Nigeria.

Biddings were received and the lot eventually fell on Bi-Courtney Limited, a wholly indigenous conglomerate and the parent company of Bi-Courtney Aviation Services Limited (BASL). The contract was awarded in 2003.

From equity of the owners/proprietor and loans from six banks, the terminal was completed and commenced operations on May 7, 2007. While the domestic terminal seamlessly ran better than international airports in the country and remains a pride of both friends and foes, it has also been a subject of a serious legal tussle between BASL and FAAN/FG almost since inception. And this battle, unfortunately still ongoing, has been described as a low point and a bad advertisement for the concession plan of the current administration.

Part of the agreements was that BASL will operate the facility, as the sole domestic terminal in Lagos for a period of 10 to 15 years, with an addendum for the extension to 36 years as is the case for most of such investments globally, given the huge capital intensive nature of the venture.

BASL had later sought to explore the 36-year concession window, to help investors recoup the heavy investment that was described as “unprecedented” since the venture was first of its kind. The Guardian gathered that though BASL had the sympathy and goodwill of the then governments (Obasanjo and later Yar’Adua-led era), much to the displeasure of BASL’s landlord, FAAN.

For FAAN, BASL was riding on undue preferences, courtesy of friends within the government circle. While BASL maintains that the short-lived Yar’ Adua administration had approved the 36 years concession period, FAAN insisted that the initial 10 to 15 years agreement was sacrosanct.

It was amidst the conflict that FAAN awarded the construction of General Aviation Terminal (GAT), Lagos, to rival operations of MMA2 and contravene part of the BASL/FAAN agreement, especially the monopoly clause.

When tested at an Arbitration Panel and law courts, up to the Court of Appeal, the rulings were in favour of BASL, including the allocation of the GAT to BASL and the endorsement of a 36 years concession period.

The Guardian learnt that there is a subsisting judgment of N132 billion in favour of Bi-Courtney, due to FAAN’s “illegal” operation of the GAT. This judgment was obtained in 2012 but still not obeyed till date.

Notwithstanding the crisis, the facility has continued to forge ahead in standards, to position it as a model for the concession programme. Recently, the facility received $500,000 worth of new equipment to upgrade the terminal.

Group Corporate Affairs Manager of the BASL, Mikail Mumuni, said the upgrade of the x-ray machine and air conditioning systems was to enhance passengers’ safety, security and comfort.

Mumuni said the ongoing upgrade of the facilities was part of the company’s determination to continue to give Nigeria the best airport terminal comparable to those available in developed economies.

A legal practitioner and aviation enthusiast, Kehinde Agunbiade, said it was quite disappointing that the current administration, like the other before it, allowed the conflict of interest to drag for this long.

“In case they are missing it, you cannot put something on nothing and expect it to stand. The only foundation upon which the government can leverage to woo both foreign and local investors into the aviation business is the MMA2 success story. Unfortunately, the same government has created a mess of a good selling point.

“From what I know, FAAN has been unable to keep the agreement it reached ab initio. Again, it has failed to obey court orders on the same issue. And you think any credible investors will want to do business with an entity that cannot keep its word?” Agunbiade said.

Fresh booby-traps
Secretary of the Nigerian Union of Pensioners (NUP), FAAN branch, Emeka Njoku, warned prospective bidders to be wary of over 60 pending litigations arising from several faulty concession agreements, including the BASL and FG/FAAN faceoff over MMA2.

The NUP alleged that FAAN owes contractors, who have delivered contracts of over N15 billion. NUP urged bidders to investigate not only their claims, but should also clarify from the Minister, “how the over $1 billion loan from China for the construction of the same terminals earmarked for concession would be repaid”.

The workers also alleged that FAAN generates an average of N70 to N75 billion yearly and remits an average of N1 billion monthly into the Federation Account while monthly salaries for the agency’s 8000 staff currently stands at over N2.3 billion. But in the past four months, about N2 billion deducted from staff salaries for cooperative contributions have not been remitted.

“While more than two-year arrears of minimum wage is yet to be implemented and N3 billion in gratuities not paid to retired staff, the most critical aspect of the debt is the staff accrued rights of over N120 billion. That figure does not include accrued rights from 2017 till date, which if valued, may bring the total amount to N150 billion. What FAAN presently has with PENCOM is not up to N7 billion. Is that not a crisis? And they want to concession the airport with all these unresolved issues. We will resist it,” an official enthused.

Secretary General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu, said there are too many unsavory ‘experiences’ to deter new interests in the public-private partnership venture.

Ojikutu said the foreign investors and those who could be technical partners too are learning from the experiences of: Virgin Atlantic and Virgin Nigeria; Dangote and the PH Refineries; Bi-Courtney and MM2, and so on.

He said the recent pronouncement by the minister to stop state governments from taking part in the concessions was not well thought out.

“For me, it is not a Federal Government policy, but a unilateral decision. The reason for such pronouncements should be stated for the understanding of credible Nigerian investors, foreign investors and technical partners willing to partner with these.

“If you don’t know what you are looking for, you can never find it. Do we really know the true Estimated Earnings annually from these airports, not the FAAN reported earnings? If we don’t know and make it public, then we are far away from the figures we are brandishing to the public and possibly the reasons why the credible people are staying away. We must work out a five years infrastructure development plan for each of the airports for the period of the concessions before determining the sharing formula. These efforts are not found in any of the concession documents that I have seen.

“Secondly, what service facilities or infrastructure are we giving out for concessions? Again, let us avoid future conflicts with the ICAO and the FAA by not involving aeronautical services among services for concessions. Let us be specific about the non-aeronautical services that are going for concessions. Even though it is generally being stated that it is the terminals that are going for concessions, we have no less than four layers of aviation security within each of these airports. What is the plan for it or the plans for the recertification after the concessions?”

Source: guardian

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