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US$250m private investment for national airline: How feasible is 24 months execution?

The release of the Aviation Development Roadmap by the Ministry of Aviation in reaction to the questions being asked about the project has opened the possibility for more questions especially on how feasible the national carrier is giving  the current administration has a year and eight months to go and with the competing demands in this COVID-19 era including security, health and other important areas, how viable is it all. ANTHONY OMOH writes

FEDERAL Government last week, in a document released by the Ministry of Aviation, gave an update on the proposed establishment of the national carrier indicating that it aims to raise US$250m (N102.75bn) from private investors to start the airline between now and 2023, barely 24 months away.

The Ministry in the document on the Aviation Development Roadmap of the present administration explained that the project development phase has been complete with the development of the outline business case (OBC) and subsequent issuance of compliance certificate by the Infrastructure Concession Regulatory Commission (ICRC).

The Ministry also explained that the next phase would be the placement of request for qualification (RFQ) in local and international media

“The next step will involve the commencement of procurement phase by placing advert for RFQ in national dailies and foreign media. $250m approximately is to be raised to start up the airline by private investors,” the document stated.

Minister of Aviation, Senator Hadi Sirika at the three day Public hearing on aviation agencies at the National Assembly Complex in Abuja

The document said, “The national carrier project will be private sector driven, with the government holding not more than five per cent of the shares. The private sector consortium may comprise reputable international airlines (such as Qantas), leasing companies, aircraft manufacturers (OEMs), financial and institutional investors.”

However, the ministry’s response which was borne out of criticism over the delay in the actualization of the national carrier project despite monies allocated to the venture as well as other five projects listed in the roadmap seems to have opened a new vista for questions to be asked of the government.

This includes the fact that with a short time left for the present administration to round off, and the lack of continuity in government at all levels, will 24 months be enough to garner private investors to bring in $250million for the project? Will said monies be enough to even kick start a viable national carrier? As well as why would government be investing in a new carrier when it has no fewer than three airlines it owns through Asset Management Corporation of Nigeria (AMCON)?

And in this new normal where investors are cutting their losses world over due to the dip in air travel majorly caused by the virus and the apathy presented by the strict protocols causing travelers to shun physical for virtual meetings, who will want to invest as the situation is now,  when they were wary before the covid-19pandemic?

The Managing Director, Flight and Logistics Solutions, Amos Akpan told NigerianFLIGHTDECK to get private investors to invest $250m in establishing a national airline will be a difficult task for the present government for numerous factors such as return on investment (ROI), business environment and other latent factors.

“To get private investors to invest $250m in establishing a national airline will be a difficult task for the present government. Why? Investors have factors they consider before they invest. They will consider if there will be returns on that investment, and when will they recoup such returns? They will consider the suitability of the environment and why choose that environment amongst the available options. The due diligence and risk assessment analysis will be carried out.

“The actual setting up of the national airline requires putting enormous infrastructures in place. Considering above factors, it will be extremely difficult to establish and operate national airline in one year and eight months. My advice to this administration is to build enabling environment for investment first. The right environment will attract investors.

“By illustration; there is need to set up and run cargo Operations to take advantage of the increasing international cargo market. Does NCAA have trained inspectors on the B767 or A330 freighters? The simulator that government bought for the B737 classics; are they installed? Are our pilots having their simulation training there? We need to address the issue of MRO. Should we invest to increase the existing facilities and capacity in Aero Contractors? Or partner with the existing infrastructure in Victor Attah airport, Uyo to make it functional and serve the aircraft in the region? Training for skills is critical in Nigerian industry aviation today.

“Positioning to attract investment is more critical now. If the gestation of investment runs into the next government coming at 2023, will it affect the agreements established with this government? Nigerians still experience discriminatory aircraft leasing agreements and insurance program. We are still trying to effect the implementation of no duty on aircraft spare parts.

“The forex regime is yet to accommodate airline operators. Interlining and cooperation is still at discussion of concept stage. Let’s fix the platform or foundation first before we can build or launch on it.

Air peace Embraer E195-02

Olumide Ohunayo, Head of Research Zenith Travel who spoke told NigerianFLIGHTDECK that there is no amount too small for a national carrier if there is high credibility and contact with lessors, aircraft manufacturers and other airlines; however this is something that history shows the country has not had.

He however said the money was not the issue as the major concern was why government who has three airlines on its stable is still trying to invest in a fourth instead of investing in the industry that is already operating at monumental costs.

Mr. Ohunayo gave three conditions where it was important for government to step in and establish a national airlines implying that none of those conditions which may have played out in the past is currently in play present day.

He said,” There is no amount that is too small to use to start an airline depending on your contact and level of credibility. You can probably have contacts with other airlines and leasing companies and some manufacturers by virtue of you business line in the past, almost every credit facility would be given to you to have some aircraft since you are not buying outright. And you can start and use the $250million dollars for some other things.

“But the issue here right now is not about the $250 million, it is about the viability of this project. Why should the government be starting an airline now when AMCON another agency of the government has three airlines on its stable? Why should the government want to start a new airline with the use of private investors when we have over 23 airlines and more are still coming in from other investors?  So is it that the national carrier will be more projected than those who are in the industry already that have been sweating over the years?

“Again, we were given N27bn for palliatives to support the covid-19 issues in the industry, N5bn was released to an industry that is operating and N22 billion was kept for a project at its infancy. What I see now is we must have a national carrier than the necessity for having it.

“There are three conditions where you must have a national carrier, one, where the industry is at its teething stage and there is virtually no airline then the government can establish a national carrier and we did this to Nigerian airways then, Again, when the major airline collapses, If you want to save jobs and restore air transportation then government can step in with an airline to save the country like when Arik was going down with Aero they had to step in through AMCON and at that point that would be a national carrier because it is owned by government .

“The third is when aircraft are not available to operate; we have 23 airlines so what is our issue? All we need is to strengthen them. If the government is still strong enough heading this national carrier direction it is either the join AMCON or they invest in our private carriers,” he said.

NG Eagle Aircraft

Group Captain John Ojikutu (Retd) who reacted to the new document making rounds questioned the kind of national carrier the government planned to set up with the sum of money it plans for private investors to bring to the table.

He said, “Private investors will include foreign and local; how much is $250m in a national carrier or how many aircraft would that buy? How much would government investment of 10% be in the national carrier? If we want a national carrier let it be now or we better go for a flag carrier and government take a rest from the journey it started in 1993 when the national carrier became government airline.

“A restart in 2017 has yielded no fruitful result with government attempt alone to inject $300m. What really do we want from the national carrier? If we don’t know what we are looking for, we can never find it. Peace

Recall, same national carrier project christened the Nigeria Air was unveiled in July 18, 2018 in Farnborough, United Kingdom without any aircraft flying until the project was suspended indefinitely in September 19 same year by the Federal Executive Council (FEC) for the lack of feasibility of the project.

However, the Minister of Aviation, Senator Hadi Sirika is still insistent that the project remains on course and consistently emphasized the determination of the present government to deliver Nigeria a low-cost, competitive national airline, five years on.

About NigerianFlightDeck

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Nigerianflightdeck is an online news and magazine platform reporting business stories with a bias for aviation and travel. It is borne out of the intention to inform, educate as well as alter perceptions with balanced reportage.

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