Qatar Airways to run Nigeria Air

Posted: July 27, 2018 in general
Tags: , ,
Nigeria Air launch

(From left): Permanent Secretary, Alhaji Zakari Sabiu, Ministry of Transportation, Minister of State Aviation, Sen. Hadi Sirika, Capt. Bob Hayes and DG-infrastructure Concession Regulatory Commission (ICRC), Chidi Izuwah in a group photograph shortly after unveiling the new name and logo of the National Carrier “Nigeria Air ” at just-concluded Air Show in Farnborough, England, last Wednesday

By VICTOR NZE

Indications are rife that the Federal Government will hand over the newly-established national carrier, Nigeria Air, to Qatar Airways to manage and operate, as the Gulf state-owned airline may emerge the preferred bidder in the event of an open bid process.

With the completion of the new name and logo unveiling by the Minister of State Aviation, Hadi Sirika, at the just-concluded Farnborough International Air Show in the United Kingdom, including an official announcement of a December 19 take-off date for operations, all trails point to Nigeria exploiting the contents of an expanded BASA with Qatar to invite the already established Gulf state carrier to manage the national carrier, from fleeting to routing of operations.

The postulations surrounding the Qatar Airways take-over is on the strength of a late February, 2016 state visit by President Muhammadu Buhari to the Kingdom of Qatar to meet with Sheikh Tamim Bin Hamad al-Thani with Nigeria signing agreements with Qatar on the protection of investment and avoidance of multiple taxations.

According to Senior Special Assistant on Media to the President, Garba Shehu, the other agreement on Bilateral Services Agreement, BASA ‘bears the imprint of Nigeria’s ambition of transforming into the international travel hub for West-Africa’s 400 million people.’

Shehu disclosed further that the Qatari Emir gave a prompt directive for support and collaboration with Nigeria on the plans to restart a national airline and a further development of airports infrastructure.

With the operation model of Nigeria Air still shrouded in secrecy, and source of funding in the same direction, economic experts have expressed doubts over the sustainability of the carrier in the face of the present business climate of the aviation industry in the country.

This is also as many have questioned the source of funding or grounds for sustainability against the backdrop of the fact that the project was not appropriated for in the 2018 budget signed into law at the second quarter of this year.

The experts also picked holes in the Federal Government’s purported meeting with aircraft manufacturers on the sidelines of the just-concluded Farnborough International Air Show in London, saying the aircraft being ordered may already be in the hangar of the preferred airline managers awaiting delivery, as Boeing and Airbus do not respond to small orders like the volume the Nigerian government may be requesting, let alone for older aircraft types like the A330 range.

As it is, the Nigerian government is easily making it hard for stakeholders to believe it is genuinely determined to take keen steps towards setting up a national carrier under best global practices, considering that the Outline Business Case Certificate granted it to commence start-up also bars it from managing it. In the same way as many also wonder at how the reported $300 million commitment translates to a 5 per cent equity stake it plans to hold in the new carrier.

This then leaves open speculations that the expanded BASA with Qatar is about to be activated by the Nigerian authorities.

Many also posit that the $300 million commitment is expected to cover the cost of name and logo design, said to have been handled by a Bahraini firm at a cost of $500, 000.

According to Minister of State for Aviation, Hadi Sirika, the proposed airline will gulp $8.8million preliminary cost and $300 million as take-off cost, while also stressing that the Federal Government is not fully funding the airline as it has adopted midwifing it via the option of a Public Private partnership, to deliver a national carrier that would stand the test of time and be world class in operation and management.

According to Sirika, Nigeria will receive the first set of five airplanes for the airliner, December 19, adding that the proposed airline will make profit in three years after operations.

Receiving the Outline Business Case Certificate of Compliance for the establishment of the airline from the Director General, Infrastructure Concession Regulatory Commission (ICRC), Mr Chidi Izuwah, the minister, penultimate weekend, said the milestone was a testament on how far the project had gone.

“We will make the investments and follow the business plan through private sector management.

“We intend to get a 30 aircraft market in five years. But we will begin with five aircraft on the day of launch,” said the minister.

Sirika explained that the government would step in to cover the funding gap at the onset and ease out thereafter, adding that government would not get involved in the management of the national carrier.

He said Nigeria’s population of over 180 million people is huge enough to support aviation, adding that the airline would take advantage of Bilateral Air Service Agreement (BASA) that the country had with over 70 countries, as well as the African Single Air Transport Market and will be the best player if the government gets it right.

On his part, Director General of ICRC, Izuwah, said the presentation of the Certificate of Compliance was an official green light to proceed with the procurement process, further explaining that government would bring its contribution to kick-start the airline, adding that the amount of equity the partners would hold would determine government contribution.

According to him, start-up cost over the next three years is about $300 million, but pre-start-up is $8.8 million.

“The rest of the investment will be equity injection which will happen in tranches because you do not need all the monies at once. External capital injection also depends on the profitability of the airline.

“This is a bankable business, and the government will get a strategic partner who will invest in the national carrier and when we get through the bidding process, more facts will emerge. The government will have to spend the pre-start-up cost like the brand name, the office and other start up. It will be a world class airline with domestic, regional and international operations,” he said.

However, the Outline Business Case Certificate by the ICRC bars the Nigerian government from involvement in the administration of Nigeria Air, which rules out direct management of the airline by the government, and paves the way for an outside firm to move in.

“This certificate is granted on the condition that the Federal Government demonstrates her commitment to leverage private sector capital and expertise towards the establishment of the National Carrier through the provision of an upfront grant/Viability Gap Funding (VGF) to fund aircraft acquisition/start-up capital. The FGN also agrees to zero contribution to airline management decisions and zero management control by the government. Any attempt to impose government control over the management of the Airline invalidates this certificate and the entire process.

“In view of the fact that the mitigating conditions for the project may change over time, this Certificate is valid for 12 months from the date indicated below. This certificate is therefore issued to enable the Ministry commence an international open competitive bidding process to procure a world-class strategic investor to manage, operate, maintain, and invest in the National Carrier,” the certificate read.

With Qatar Airways leveraging on the expanded BASA with Nigeria, the airline is expected to focus on international operations using the Nigeria Air carrier with direct international flights using the Murtala Mohammed International Airport, Lagos as main hub, and stop-overs at the Aminu Kano and Nnamdi Azikiwe international airports in Kano and Abuja, respectively. The Port Harcourt airport is expected to follow when the facility is ready for operations.

In addition, while strictly international operations could be viable, domestic and regional operations for the national carrier has been declared a business gamble.

Describing the assurances by Sirika that Nigeria Air will make profit in three years after operations, as ‘mere patriotism,’ experts have further countered the minister’s statement, positing that the domestic environment makes such claims improbable, even as others say the exploits of some African carriers should serve as pointer to what lies ahead for Nigeria Air.

According to investigations, only Ethiopian Air has broken even, a feat the carrier only achieved in the last four years, while other top airlines like South African Airways, Kenyan Airways, EgyptAir are neck deep in millions of dollars debt in spite of their governments’ support. In the case of RwandAir, the East African carrier is said to have never audited its financial report.

A Nigerian carrier may not be a wise investment, but farming out the project to Qatar Airways may also help in cutting losses that now stares Nigeria Air in the face as its enters the competition with other carriers either on the domestic front or international market.

Chairman, Airline Operators of Nigeria (AON), Captain Noggie Meggison, said: “Nigerian airlines are at a disadvantage to other African Airlines that are largely government owned and heavily subsidised. For instance, South African Airways got on the average about $350m yearly in the past decade; Kenya Airways got about $600m in 2016, while RwandAir has never published its financial results for over a decade. Yet they will be competing against Nigerian airlines with private finance at 28 percent

“Nigerian airlines are subjected to multiple charges, taxes, levies and fees. On the average, we pay about 37 different charges that come under the guise of statutory levies and taxes to sustain a staff strength of about 18,000 staff of the various government agencies compared to most African carriers who pay a fraction in their countries to support a staff strength of less than 500.

“Airlines in Nigeria pay high prices for JetA1 due to high taxes compared to some other countries where VAT and taxes in JetA1 have been abolished to their local carriers and some of them have local production of subsidised fuel”.

In the same vein, Chairman, Air Peace Nigeria, Barrister Allen Onyeama, posited that much of the problems of the indigenous carriers challenges at the international market stems from the fact that the government does not offer any form of protection for the local operators.

Onyeama, who was speaking during the just-concluded 22nd League of Airports and Aviation Correspondents (LAAC) Seminar, while also insisting he was not against the Nigeria Air project, maintained that government has a duty to create a level playing field for all competitors to operate in.

“ASKY was established in Togo and their population is not as many as Lagos yet they are flying into Nigeria and other countries meaning their market is not Togo. Yet when we (Air Peace) wanted to go there, we were given approval in Nigeria only to get there and we were told we cannot fly. I went to the media and also threatened to file legal action and then someone comes to me and says don’t go to court? This is supposed to be where the country stands up for the airline but no. Eventually when they decided to give us the approvals we need to fly them, they charge $5000 landing. And yet we say we are protecting our own. Up until now, we are not flying into Côte d’Ivoire because of their ludicrous charges, yet Air Côte d’Ivoire flies here. So how have we protected our airlines from being fleeced?

”If you say it (Nigeria Air) is a national carrier and it is private investors driven, are you not saying it is just investors like me, Alhaji Bankole (Medview CEO) and other investors? So you are simply saying that government is just supporting another private airline? I do not have a problem with the national carrier per se it is welcome but it must not be given any undue advantage over other airlines as the owners are investors too. Now, as this airline is coming on stream are they going to take routes already allocated to other airlines and give it to this carrier? These are the things government has not told us,” said Onyeama.

While a Qatar Airways take-over and management of Nigeria Air may solve some of the concerns expressed by aviation stakeholders over the national carrier project, some other issues already raised could equally shake-up the industry, but for all the wrong reasons.

Comments
  1. Nigerian pilot says:

    Your headline appears as a factual statement, but instead the body of your article contains speculation and conjecture, nothing concerning factual or privileged information. You would do well to amend your headline.

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