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THE President, Major General Muhammadu Buhari (retd.), and his Minister of Aviation, Hadi Sirika, are stubbornly pressing ahead with their plan to establish another potentially profligate enterprise – Nigeria Air. To this effect, the reality of a state-backed national carrier got closer on June 6 when the ministry received an Air Transport Licence from the regulator. While Sirika and his allies celebrated, many stakeholders however expressed strong doubts on the viability of the proposed airline in the dynamic global aviation industry.
For Sirika and Buhari, establishing a national carrier has been an obsession. The minister launched the branding and livery for Nigeria Air during an elaborate road show at the Farnborough Air Show in London in July 2018. He pledged then that the airline would commence operations by the end of 2018. Four years after, that plan has not materialised even after an ‘interim management committee’ was empanelled.
Though its details remain hazy, a new take-off date has been scheduled for later this year, after Nigeria Air Limited must have secured an Air Operating Certificate. The AOC takes 18 months to grant, according to industry regulations. But being government-supported, the regulators may be tempted to fast-track it. If granted without due process, this will instantly create an image problem for the project. Although Sirika says the government will own only 5.0 per cent equity, leaving 95 per cent for private investors, the partners and other details are shrouded in secrecy.
Sirika and his principal are enamoured of the project simply for “national pride,” not economics. The newly appointed CEO of Nigeria Air, Dapo Olumide, says “the objective of this national airline and the reason (President) Buhari insisted on us having such a thing was because we need to restore pride to Nigeria outside the country. When you have a national airline, you have the ability to deploy capacity to different routes and it’s not about revenue but it’s about exposure.” In today’s world, this is sheer fantasy and a waste of public resources.
To be fair, Sirika says Nigeria Air is aimed at maximising the economic benefits of 80 Bilateral Air Services Agreements. But this argument falls flat. It is far better to further liberalise the aviation sector and promote private airlines to utilise the benefits of BASA. Experience around the world has proved that enabling private airlines’ growth is better than pouring public funds into commercial enterprises. The role of the government is to create an enabling competitive environment for private investment.
At best, Nigeria Air is a vainglorious attempt to whitewash the stained image of the regime, serving just a few influential people for travel in the absence of standard road infrastructure.
There are deeper problems in the sector. One is the absence of domestic hangars to undertake the maintenance of aircraft. As such, aircraft are routinely flown abroad for servicing. This costs the economy N1.04 trillion annually, says the Federal Airports Authority of Nigeria. The Airline Operators of Nigeria says that 70 airlines have collapsed in the past few years and three more are on the verge of extinction due to high operating costs, especially the cost of aviation fuel. Operations at the Kaduna International Airport have been in limbo since March when terrorists attacked it.
The strongest case against Nigeria Air is that Nigeria has performed very poorly with state-owned enterprises. Joint ventures by the government with investors have equally failed. Grand corruption, mismanagement, and cronyism ignited their collapse. Its four public refineries are comatose, provoking imports and petrol subsidies valued at N4 trillion in 2022. Public utilities suffer from the same dysfunction.
Until the Olusegun Obasanjo administration liberalised the telecommunications industry to bring in private ownership in 2001, the sole national telecoms carrier, NITEL, had just 720,000 lines for Nigeria’s then 125 million people. Today, there are 199.2 million GSM lines, says the Nigerian Communications Commission.
Before liberalisation, the numbers were awful. As against the 1:100 teledensity recommended by the International Telecommunications Union, Nigeria recorded 1:280 up to year 2000. Between 1966 and 2000, the sector averaged a paltry 0.3 per cent contribution to GDP. In comparison, telecoms services contributed a high of 14.3 per cent to GDP in second quarter 2020, ending 2021 at 12.61 per cent to GDP.
Nigeria Airways – the precursor of Nigeria Air –collapsed in 2003, more than 50 years after the government raised its stake to 100 per cent. By the time it went under, it had lost 27 of its 30 aircraft and had debts of $528 million. In March, its ex-workers staged a protest to demand N33 billion in pension arrears. In that period, many private airlines have come and gone.
Therefore, Sirika and Buhari have no compelling reasons to plunge headlong into the Nigeria Air venture. Apart from being ill-advised, the project is shrouded in opacity. Till now, the shareholding structure and the names of the investors are unstated. That is bad for investor confidence.
In the past 40 years, the global best practice is for government to privatise rather than establish airlines. The United Kingdom led in 1987 by privatising the iconic British Airways. Since then, Lufthansa (2004), Iberia (2001), Air Canada (1989), Air France (2004), Air India (2001), Cape Verde Airlines (2018), Aėromexico (2007), Japan Airlines (2001) and South African Airways (2022), have all been privatised by the governments that owned them. Air France, which merged with KLM in 2004, carried 87.3 million passengers in 2014. Today, Etihad of UAE owns 49 per cent stake in Air Serbia; 33.3 per cent in the Swiss carrier, Darwin Airline (rebranded as Etihad Regional Airlines); 29 per cent stake in airberlin; and 49 per cent stake in Alitalia.
The National Assembly should stop Sirika and Buhari from deploying state resources into the Nigeria Air project. Privatisation has been undertaken with great success by several European countries. Pivoting away from their doomed venture, Buhari should speed up the plan to concession 21 airports run by FAAN and review civil aviation regulations to draw in investors through a transparent process.
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