On 26th May 2023, at the twilight of President Mohammadu Buhari’s government, the core investor, Ethiopian Air, and the other investors (Federal Government inclusive) unveiled the model aircraft for Nigeria,
The aircraft was an Ethiopian Air aircraft a Boeing 737-800 with registration number ET – APL. This unveiling generated a frenzy across the country based on hugely distorted stories that made the round to give the airline and the then Minister Sen. Hadi Sirika a bad name just to kill the airline, which would no doubt be a liberator of local and international Nigerian air travelers.
Justification for a National Carrier
The national carrier will reduce annual capital flight from Nigeria to the tune of hundreds of millions of dollars by carrying a chunk of the over two million international passengers; Floating a National Carrier will enable Nigeria to gain optimal benefits from the BASA Agreements; improve national image and prestige; National Carrier will be carried out using PPP concept; and the National carrier will be expected to form alliance and/or Joint Venture with other airlines to increase reach and number of routes (code-share flights).
Also, the National Carrier may introduce competition leading to fare drop and better services; it will also generate employment for Nigerians; it will have a multiplier effect on the economy through the establishment of support services such as tourism and hospitality services and the national carrier is essential for the development of a hub.
The Gang Up Against Nigeria Air
Some of the distorted stories on Nigeria Air and Sirika led by the Airlines Operators of Nigeria (AON) included that; the FG launched the airline for scheduled operations even when the Air Operators Certificate (AOC) had not been issued by the regulator, the Nigerian Civil Aviation Authority (NCAA). They also claimed the process leading to Ethiopian Air emerging as the core investor was shrouded in secrecy and that ET was handed 49 percent majority equity for free as they wouldn’t be making any financial commitments.
This is even when Sen. Sirika had clarified that Nigeria Air had been previously unveiled but hasn’t been launched for flight operations.
He also clarified that the business had a total of $250 million in initial investments from all partners. Out of this ET should pay about $125.5 million being 49 percent equity in the deal after the shareholders’ agreement is signed. Every other investor will pay its equity value. It is only the 5 percent of government equity that will be in kind for rentals, and services. Don’t forget the FG has been spending money on the project thus after computation, if it is above 5 percent, they get a refund, if it is less, the FG will upscale its services to 5 percent, the ex-minister clarified recently.
They also accused Hadi Sirika to have squandered N85 billion on Nigeria Air thus, should be invested for alleged corruption, an accusation that turned out to be completely false as the ex-minister public said less than N3 billion was approved for Nigeria Air in seven years and not all the funds had been expended.
Prof. Obiora Okonkwo, the Spokesman, for AON had claimed in a statement that “As indigenous operators, we are happy and grateful to the NCAA for saving us from this punishment by resisting the pressure from Minister Hadi Sirika to grant an AOC to Nigeria Air without going through the due process.”
However, the Ex-Minister had told Nigerians and indeed the global aviation community during the stakeholders’ meeting on March 23rd, 2023, and at the May 26th model aircraft unveiling event that the regulatory process to obtain an AOC for Nigeria Air was still being followed strictly and the NCAA wasn’t on any pressure to circumvent the rules. That much the NCAA had confirmed at all the stakeholders’ meetings.
The AON had also claimed that the Ministerial Committee on the Establishment of a National Carrier recommended the establishment of a National Carrier that is private sector-driven with minimum government involvement. As soon as that recommendation was jettisoned every other thing about Nigeria Air was engulfed in secrecy. ICRC in a recent regulatory report debunked that claim.
Sirika also told Arise TV that the procurement was advertised in Nigerian papers and the Economist of London. There was a bidders’ conference and the members of AON participated. Air Peace participated. The regulators were there. Everything was hosted on the websites of both the Federal Ministry of Aviation and the ICRC. ET won the bidding, so where is the secrecy? Hadi asked. We had eight stakeholders’ conferences where Nigeria Air was discussed. AON members were present and some even made presentations during the stakeholders’ conferences.
“The ICRC provided the required guidance for the implementation of the project in line with the requirements of the ICRC Establishment Act 2005 and the National Policy on PPPs. Following the guidance provided,” it said.
The ICRC said after 10 weeks of advertisement, only the Ethiopian Airlines consortium submitted a bid and that the project proceeded to the negotiation stage, based on Section 5 (a) of the ICRC Establishment Act 2005.
The section states that if after advertisement in accordance with Section 4 of this Act only one contractor or project proponent applied or submits a bid or proposal, or only one contractor or project proponent meets the prequalification requirements, the ministry, agency, corporation, body may undertake direct negotiation without competitive bidding for any contract to be entered into, pursuant to Section 1 of the Act.
It continued, “The consortium was thereafter requested to meet and resolve all their issues and present a common position for the purpose of negotiations and executing the PPP agreement with the government. They were unable to resolve their issues and sign the shareholder’s agreement as requested.
Ethiopian Airline has 49 percent; MRS Oil and Gas Limited, 15 percent; SAHCO, 15 percent; Federal Government, five percent while 16 percent had yet to be allotted
Recall that AON had gone to court seeking to stop the floating of the airline citing unfair competition and that ET will shortchange Nigeria.
Sirika however revealed that the prior discussions on the structure was that all the crew, pilots, engineers, and cabin crew must be Nigerians once they are competent. On the management of the airline, it is the shareholders that will be decided who gets what. But the company will be operated within the law.
On AON’s claim that ET will be handed 15 years tax holidays for Nigeria Air, the ex-Minister had told Arise T V that it has been rescinded. It will operate and enjoy the same tax parameters as local airlines.
We have supported local airlines. 50 percent of local airlines came on board during our tenure. We have removed some taxes like customs duties and VAT on aircraft and spares. We have given them a bailout and more, this is unprecedented.
Industry analysts have hailed the choice of Ethiopian Airlines as the core investor because of their competence and capacity.
They said with the national carrier, the local airfare will reduce significantly as there will be effective competition with the local carriers who have held passengers, hostage.
“Ethiopians are masters of the game. They have been in business for over 77 years. They also posted profit during COVID when most airlines posted losses. In 2022 they posted a profit of $1bn. Once the AOC is ready, they will hit the ground running” Mr. David Akwu, an Economics analyst reechoed what the ex-minister had consistently said.
He also the gang up by some local airlines shows they don’t want to innovate and run their business in a cost-efficient and profitable manner.
“The Nigerian airlines need to retool their business model, finances, and corporate governance. Corporate governance in Nigerian airlines is zero hence the high mortality rate of local airlines” he stated.