FG insists on Nigeria Air as project gets priority in N27b bailout fund
• Pandemic forecloses credible investors, technical partners
• Stakeholders disagree on prospect, economic viability
Two years ago, the Federal Government unveiled Nigeria’s new national carrier in London. The Nigeria Air project has however remained a dream with little or no hope of becoming a reality.
The multibillion naira investment has, in the last one year, been stalled. This happened just as the project was about to enter the procurement stage of implementation.
The fate of the project has been worsened by the adverse effects of COVID-19 on businesses; the chances of attracting new investors and credible technical partners have been dimmed by the pandemic.
Despite the situation, the Federal Government has continued to assure Nigerians that the project remains a priority. While some of the aviation stakeholders rallied the Federal Government to overcome the current constraints, modify the plan and create the airline in 2021, others expressed doubts on its feasibility and economic viability.
The Federal Government on July 18, 2018 unveiled the name and logo of the proposed carrier at the Farnborough International Public Airshow in London, United Kingdom (UK) ahead of the planned initial take-off on December 24 of that year. The lack of budgetary provision and criticism by the public forced the Minister of Aviation, Hadi Sirika, to “temporarily” ditch the December 2018 roll-out plan after about N80 million was reportedly expended. Sirika, however, denied the claim, saying less than N10 million was spent. It has remained ditched to date.
Sources at the Ministry of Aviation would, however, argue that the project had not been jettisoned. A director at the Ministry of Aviation, at the weekend, said the project was “now getting the attention it requires from the government and before long, we will advertise, inviting bidders.”
An example of “attention” cited was the N27bn aviation bailout lumpsum that has been proposed for the industry. A breakdown of the project elements, under the N27bn cushion, released last month, included payroll grant to airlines, handlers, caterers and related services; provision of single-digit soft loans with long-term repayment plan; and “beginning of processes for the establishment of a private sector-driven national carrier. The work plan has a 12-month duration.”
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. The equity was earlier backed by N47bn in the 2019 budget to help the airline take off after it reached the procurement stage early 2019. The 2020 budget was silent on Nigeria Air.
The worry among stakeholders is its ability to attract 90 per cent of investment from both local and foreign investors, coupled with a credible technical partner to drive its operations. The worry is not out of place, especially when benchmarked against the $314bn, which global airlines have lost to COVID-19, according to the International Air Transport Association’s (IATA) estimates.
Similarly, many credible potential partners are struggling to remain in business; managing to hang on by shedding some liabilities and injecting government’s bailout funds.
For instance, British Airways at the weekend disclosed plans to retire all 747 four-engine airplanes over high cost of maintenance. Delta Air Lines earlier estimated the loss of $534 million for Q1 2020.
Emirates Airline’s President, Tim Clark, recently said: “probably up to 15 per cent” of the carrier’s workforce would be cut as a result of the coronavirus crisis. That equates to around 9,000 jobs out of the 60,000 Emirates had going into the pandemic. Another Middle Eastern operator, Qatar Airways, also announced job cuts affecting up to 9,000 positions out of 45,000 employees in May.
In Africa, South African Airways has filed for bankruptcy. Kenya Airways is in the process of being nationalised. Ethiopian Airways, the biggest on the continent, has already flagged a loss of $550m in April. President Hage Geingob of Namibia recently told the parliament that Air Namibia, a national carrier, might be liquidated over series of losses despite bailouts.
According to the International Civil Aviation Association (ICAO), African airlines are at risk of losing $6bn in revenue compared to 2019 and three million jobs.In all these, where is the hope of investment and prospect for Nigeria Air?
Aviation Consultant, Chris Aligbe, yesterday said he expected that Nigeria Air would have taken off much earlier, even before the COVID-19 induced economic crisis. Aligbe, however, insisted that the Nigerian aviation needed a formidable carrier in the status of a national carrier to go farther than any private carrier could do.He said despite 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’m 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.
“I believe we can float the national carrier by the first quarter of 2021, and have airport concession and aircraft leasing company before the end of next year. However, if we do not have the national carrier during Buhari’s administration, then we may never have it again,” Aligbe said.
Secretary General of Aviation Safety Round Table Initiative (ASRTI), a think-tank group of the industry, Group Capt. John Ojikutu (rtd), expressed disappointment on how the project had stalled.
Ojikutu said up till the end of last year and the beginning of this year, he had no reason to think that the formation of the national carrier was not possible, “if we, as a people, not 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 bo th in and outside the country. In my last post to the honourable 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 makeup to 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.
Aviation commentator, Simon Tumba, agreed with Ojikutu. Tumba said the country was not in any position to woo the right investment to such high-risk mega projects.
He said the country lacked financial discipline, especially with the government’s hands in business ventures.
“Our government policy is so inconsistent that the next government can change everything overnight. Investors don’t like that. We need a long-term plan and strategy with the buy-in of all critical stakeholders and our policymakers to make progress. I would even suggest that the project is put into law, if possible.
“It is not rocket science that airline investment post-COVID-19 is now a dangerous gamble, especially for startups. Who will risk it? Even the mega Middle East airlines, who have ‘monies to burn’, are being careful now. The market is so uncertain and is a massive risk to invest in a startup now. Investors don’t like uncertainty. If you have the money will you invest in Nigeria Air?” Tumba queried.
– The Guardian.