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Divergent reactions trail calls to make Arik Air National Carrier (Part Two)

  • As Sirika maintains airline unfit for national carrier

The discourse on the National carrier issue deepens with others, including the Minister of Aviation, Senator Hadi Sirika lending thoughts towards whether or not government will make what they believe is the right decision and put to rest the feeling of uncertainty with regards the fate of Nigeria Air and what Government plans to do with Aero and Arik Air when the dust settles, having invested so much in those businesses through AMCON. ANTHONY OMOH chronicles the thoughts of other key stakeholders.

AS the debate continues on whether federal government will go with the advice of the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr Ahmed Lawan Kuru and designate Arik Air a national carrier more reactions have come up including that of the Minister of Aviation, Senator Hadi Sirika.

Senator Sirika, Wednesday reacted by dismissing the call by the Asset Management Company of Nigeria (AMCON) to transform Arik Airline into a national carrier.

Minister of State, Aviation Senator Hadi Sirika

Sirika who responded to questions from State House correspondents after the weekly Federal Executive Council (FEC) meeting presided over by Vice-President Yemi Osinbajo, said the airline lacked the capacity to function as a national carrier.

According to him, those advocating the transformation of Arik into a national carrier did not understand his ministry’s agenda for a national carrier, “I think something is not understood very well from the standpoint of the Ministry of Aviation via the intended national carrier.

“The carrier that I intend to bring is such a carrier that will support the national economy, with $450 million GDP for 200 million people, very equipped to compete favourably.

“The international airlines that have dominated Africa, 80 per cent of those airlines are non-African. In view of the AU Agenda 2063, the Single African Aviation Market, we thought that there will be an airline that will take up that challenge; that will take advantage of it and be able to provide services to our people.

“Nigeria, being the first country to kick-start the declaration in 1999, to establish a one common market in Africa; at the time, we wanted to take advantage of the Nigeria Airways which was the strongest airline on the continent, and we thought that we could take advantage of that and it would pay Nigeria very well. Tables turned, decisions were reversed and now, Nigeria was unlucky to have an airline that can participate in that manner.

“So, the answer to your question is that Arik, as presently constituted, is not in line with the thinking of the ministry. It will not be able to give us that airline that we need.

“However, Arik as an entity, since it is private-sector driven, can either buy shares in the new ventures or invest in any manner in the business as presently approved.

Lead Consultant on the Aviation Desk for ETIMFRI Group and former Managing Director of Fresh Air, and Capital Airlines, Mr. Amos Akpan has advised Nigerian government to focus on putting resources to create enabling environment and opportunities for private investors to establish and run a sustainable airline business that competes with others in the world.

He centred his thoughts around the processes and procedures in establishing an airline for the country, whether new or from existing, maintaining that a legal and meticulous process will eliminate any form of controversy in the future.

Lead Consultant on the Aviation Desk for ETIMFRI Group, Mr. Amos Akpan

According to the veteran with 30 years’ experience in aviation industry; since decisions have been taken Nigerians need to monitor whatever process and make sure the foundation of whatever is done is right.

He stated that National Carriers simply means Nigerian registered airline designated by Nigerian government to operate flights on the routes that Nigeria has bilateral air services agreement and that a national airline means Nigerian government owned (structurally) airline.

According to him, if it is as defined above, both Arik and Aero can be designated to fly as Nigerian carrier and if the terms national carrier and national airline are lumped together, there needs to be ownership/ structural clarification to convert them into a national airline.

He said, “If we say a company is national, it means the commonwealth of all Nigerians is invested in that company. If AMCON puts out Arik or Aero for buy, what would be the offer after due diligence? You have to know the value of Arik or Aero. You get such value by valuation audit and due diligence. This determines the value in the market or the market price. From there you will know the worth of or the amount of money that is in as their share in the new airline structure.

“If the total investment portfolio is 25 billion, what percentage of that is Arik or Aero in the new airline. The national airline or carrier must have a structure: capital funding usually called share capital. What portion of the equity is Arik or Aero in the new airline? The structure of the new company and the investment portfolio has to be clear at this formative stage. It must not be bogus or unclear.

“Let me use this opportunity to reemphasize the need to encourage maintenance repair organizations. Using Aero as an example, Aero currently has reached a status that they should be funded as an MRO. Aero is showing strength now as an MRO. This is a stronger cause to expend resources than the establishment of a national airline.

“Can we know the investors (identity)? What is the tenor of their investment portfolio (exit period)? If they are Nigerian private investors, can we know them? The answers to above questions are relevant because we should not set up ourselves to have structural issues with our national airline in future. We should remember that the gestation period for investment in an airline of such size goes beyond this government’s tenor.

“In my personal opinion, I would not advise this government to invest in the establishment and operations of an airline. My advice is drawn from the following:

“Nigeria opened the airline business in the 1980s to private investors. Since 1986 several private investors have provided airline services locally and internationally. They made some gains and incurred losses primarily because of unstable environment and the crisis of developmental stages. Nigeria airways also had its share of gains and losses before it became bankrupt and liquidated. Meanwhile private investors have continued to offer us very valuable air transport in Nigeria.

“In the light of the above, Nigerian government should now be focused on putting resources to create enabling environment and opportunities for private investors to establish and run a sustainable airline business that competes with others in the world.

On the how? Akpan said that, “Government should make sure existing bilateral air services agreement does not disadvantage Nigerian airlines at execution.  Improve our airports to global standards, make it user friendly and technologically savvy. Encourage NAMA to make it possible for aircraft to land in our airports at zero visibility and make our airspace safe and attractive for airlines.

He continued calling for government to, “Train and equip our engineers, safety and quality inspectors. Equip NCAA to carry out oversight functions over all operators in our aviation industry. Create environment to encourage maintenance repair organizations to thrive. Allow them bring in equipment and install, give them tax incentives, guarantee capital funding to enable them sustain their MRO. We should be able to maintain our aircraft, repair and overhaul spare parts in Nigeria.

“Dedicate a refinery to produce aviation fuel that would meet the demand in Nigeria and West Africa as well as sustain the current plausible dialogue between the airline operators and the ministry of aviation.

“Finally, I think our government has a lot of loads now, therefore, let us channel our resources now to grow those sectors of aviation that will help the airlines sustain profitable operations. But since the decision has been taken and money voted as working capital, we should all join hands to help make it come out as beneficial to Nigeria. We just must monitor to ensure the foundation is right like ownership structure and the investment portfolio.

Chairman, Aerospace System Consortium, Dr Yemisi Olusola in her submissions said it makes little sense taking over Arik and leaving Aero calling for a merger of both and nurse the single entity into recovery as separately they are currently stunted.

She went down memory lane stating,” In 1983 the government gave Mcdonald Douglas Corp to do a study on the future of Air Transport in the Economic Community of West African States (ECOWAS). I was the local project coordinator and director. Two things we recommended…

“Building a world class Maintenance Repair Overhaul (MRO) facility and create private domestic competition for Nigeria Airways (WT). At the time Aero was an oil service company. WT was being run as a social service which we predicted will collapse.

“Events led to political and issuance of airline license to cronies of the power that be. They had all sorts in a regulated industry. We knew it wouldn’t last

“It’s no surprise they’re collapsing. Now it doesn’t make sense taking over Arik and leave Aero. In every way possible neither will grow, so merge them and nurse one entity through a painful recovery process and AMCON and government relieved of the burdens they are not competent to handle,” she surmised.

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