By Chinelo Obogo
Year 2020 has, no doubt, been the worst year for the aviation industry in many decades. In Nigeria, an already financially challenged industry has to contend with the impact of the COVID-19 pandemic and an economic recession which experts say is the worst since 1983.
Many domestic operators have had to cut cost by sacking staff, slashing salaries and reducing flight frequencies to avoid collapse. The Federal Government recently intervened by providing N5 billion bailout, though experts say the amount is insufficient.
But as the sector tries to recover, this report x-rays events expected to happen this year which will shake up the industry by providing jobs, curtailing capital flight, easing the leasing process for domestic airlines, encouraging foreign investment, improving aircraft maintenance turnaround time and generally develop the aviation sector.
AMCON to float new airline
Early last month, the Asset Management Company of Nigeria (AMCON) appointed the former Director of Flight Operations of Arik Air, Captain Abdullahi Mahmood as the Chief Executive Officer of Aero Contractors following the stepping down of Captain Ado Sanusi as Managing Director on December 31, 2020. AMCON took over the management of Aero in February 2016 and Arik Air in February, 2017 due to the huge debts owed to both local and foreign creditors, with a view to repositioning them.
As many in the industry wondered what would become of Captain Sanusi, information emerged that he has already been penciled down by AMCON to take over Nigerian Eagle, a new airline which would be floated by the agency, while Captain Roy Ilegbodu would continue as Arik Air’s CEO.
Nigerian Eagle was incorporated on July 11, 2019 with share capital of 1,000,000,000 units and shareholders are AMCON, 499,999,999 units, while Omokhide Alaba has one unit and is very likely to begin commercial operations by the second quarter of the year.
In order to get an Air Operating Certificate (AOC) from the NCAA, Daily Sun gathered that three aircraft would be brought in for Nigerian Eagle and four more would be added when it starts domestic operations. AMCON took over the management of Arik Air in February 2017 when the airline had 26 aircraft but before then, Arik bought Boeing 737-700, Boeing 737-80, Bombardier Q400 and Bombardier CRJ as brand new aircraft and still has pending orders from the plane manufacturers for seven Boeing 787-9 and 12 Boeing 737 max.
Industry sources say that Nigerian Eagle and would commence with domestic operations before veering off into international flights but there have been concerns raised over what would become of Arik Air and Aero after AMCON floats the new airline. Presently, Arik Air doesn’t have up to eight operational aircraft, while Aero has even less and the AMCON Act gives the agency immunity against litigation. The head of corporate communications of AMCON, Jude Nwauzor, says both airlines would still be operational as AMCON has no plans to liquidate them, or else, there would have been no need to appoint a new MD for Aero. While confirming that Captain Sanusi has been designated to head the new airline, Nwauzor said the agency has other aircraft that would be deployed from other airlines and not necessarily from Arik Air.
For Aero, one of its assets is its functional Maintenance Repair and Overhaul (MRO), an essential requirement to ensure that aircraft are maintained in pre-determined conditions of airworthiness to safely support passengers and cargo. Daily Sun learned that the Ibru family which originally owned the airline, acquired about 40 percent stake after AMCON took over it and are being kept in the loop over the happenings but that there are no plans to take over the facility.
United Nigeria, Cally Air, Green Africa are also expected to commence operations in the second and third quarter of the year.
The chief executive officer of United Airlines, Obiorah Okonkwo, a businessman and owner of The Dome Entertainment Limited, Abuja, told journalists that what has delayed commencement of operations is the one-year rehabilitation of the Akanu Ibiam Airport, Enugu, where the airline is based. He said that as soon as normal flight operations resume at the airport, the company will take off with five aircraft already on the ground. The routes the airline will operate are Lagos, Abuja, Asaba, Owerri in addition to Enugu and Port Harcourt.
The airline recently carried out a demo flights from the Murtala Muhammed Airport, Lagos, to Sam Mbakwe International Airport, Owerri. It has already received its Air Operator Certificate (AOC) from the Nigeria Civil Aviation Authority (NCAA) and Aerokeys has undertaken the training of its crew.
Cally Air is a proposed joint venture between the Cross River State government and Dana group, owners of Dana Air. The state Governor, Ben Ayade, told journalists that the venture is part of his effort to increase tourism in the state. Using the state’s Dash 8-200 5N-GRS, the airline plans to start flights later in the year that would operate from its Calabar hub and fly to Lagos, Abuja and Obudu where the state’s famous Obudu Cattle Ranch resort is located. Presently, only Ibom Air and Air Peace flies to Calabar.
Green Africa airline, owned by Babawande Afolabi, has submitted applications to the Nigerian Civil Aviation Authority (NCAA) for its AOC to commence operations.
In October 2020, the airline entered into a partnership with First City Monument Bank (FCMB), which yielded $31 million in a combination of standby letter of credit and rolling working capital and in December 2020, it sent its pilots on a type-rating training and recruited cabin crew members. The airline earlier ordered 50 A220-300s aircraft from Airbus which it plans to launch as it commences operations later in the year.
The establishment of an MRO and aviation leasing company would be one of the most crucial achievements of the President Muhammadu Buhari administration and would be a huge boost for the industry.
According to the Ministry of Aviation, the establishment of both facilities would curtail capital flight, ease the leasing process for domestic airlines, encourage foreign investment, enhance technology transfer to Nigerians, improve aircraft maintenance turnaround time and generally develop the aviation sector. The Ministry said that there is presently no aviation leasing company in the entire African continent and the existing ones are controlled by major international lessors who are usually reluctant to lease aircraft to African airlines because of the risks involved.
For the MRO, the Ministry said the plan is to have an independent facility which would be sited at the Nnamdi Azikiwe International Airport, Abuja and would cater to the West and Central African market and will also service the proposed national carrier and the leasing company. It said most airlines take their aircraft oversees for maintenance and the cost is ernomous.
The leasing company would be structured as a joint venture between the FG and the private investor, where in the short term, aircraft would be leased from international lessors and sub-leased to African airlines but the long term plan is to acquire, own and lease aircraft directly to African airlines. The MRO would have the capacity to service narrow and wide body aircraft and the government would support this venture by establishing a free zone at the airports.
Already, the Ministry has announced the Consortium of A J Walters Leasing Limited and Glovesly Pro-Project Limited as the preferred bidder to establish the leasing company; while the Consortium of A J Walters Aviation Limited, EgyptAir Maintenance & Engineering (EGME) and Glovesly Pro-Project Limited as the preferred bidder to establish the MRO.
A J Walters Leasing (AJW Leasing) is the leasing subsidiary of A J Walter Group. The company optimises airline fleet strategies by leasing aircraft engines and spare parts. It manages a substantial portfolio of leases and has a customer base of 22 airlines in more than 20 countries.
Glovesly Pro-Project Limited is an indigenous and integrated company incorporated under the laws of Nigeria. The company has the capacity to contribute to the challenging and growing requirements in the Aviation industry, communication, power sector, building construction, civil engineering, Road Construction and General procurement.
EgyptAir Maintenance & Engineering (EGME) is a leading MRO in the Middle East and Africa offering Maintenance, Repair and Overhaul (MRO) services to commercial aircraft, engines and components, with a customer base of over 81 airlines. Glovesly Pro-Project Limited is an indigenous and integrated company incorporated under the laws of the Federal Republic of Nigeria.
In compliance with the Infrastructure Concession Regulatory Commission (ICRC) guidelines, a delegation from the Federal Ministry of Aviation, ICRC and the Transaction Advisers will conduct a physical due diligence exercise on the preferred bidders at their operational premises.
This will precede negotiations between the Government and the bidders, after which the Full Business Case for each project will be submitted and approved by the ICRC and the Federal Executive Council. Subsequently agreements will be signed between the preferred bidders and the Federal Government of Nigeria and implementation of the projects are expected to commence by the third quarter of this year.
Proposed concession of airports
The planned concessioning of four major international airports was supposed to kick off this year but the opposition by the Nigerian Labour Congress (NLC) and the Federal House of Representatives may stall the process.
Sirika had planned to push ahead with the concession the international airports in Lagos, Abuja, Port Harcourt this year and Kano but the NLC is putting pressure on President Buhari to call for the scrapping of the plans.
Aviation unions say that the concession which will see the concessionaire get 60 percent of the revenue sharing formula while the Federal Airport Authority of Nigeria (FAAN) gets 40 percent and still has to service the Chinese debt of over one billion US dollars is dead on arrival, providing facts that have spurred their agitation about the plan.
The NLC president, Ayuba Wabba, alleged that the concession would only maximise profit for a few individuals at the expense of tax payers and that the fine lines in the tender documents exempts the would-be concessionaire(s) from improving any facility at the airports in the next 25 years.
It alluded to a potential hemorrhage of government revenue, industrial crisis which will follow the massive layoff of workers stating that there is no compelling reason to gift away national assets to private hand who would not improve on what is all through their stay as concessionaires. The NLC also puts FAAN’s current revenue generation into account, stating that the airport manager currently generates enough to pay N70 billion into the coffers of government annually.
“As it is, FAAN currently generates about N100 billion into the coffers of the government yearly. When FAAN expenditure of about N30 billion is removed from the net income of N100billion generated by it, there is a handsome N70billion left to government to re-invest in the maintenance and upgrade of our airports,”Wabba said.
In response to the unions, the Director, Public Affairs, Ministry of Aviation, James Odaudu, posted a lengthy statement on the official Facebook page of the ministry, saying the ministry does not approve infrastructure concession programme as the role is independently played by the Infrastructure Concession Regulatory Commission (ICRC Establishment Act 2005).
It said the ICRC is Nigeria’s regulatory agency responsible for regulating all infrastructure concessions and Public-Private-Partnerships in Nigeria.
“Concessions and public-private-partnerships differ from privatization programmes. In a concession or PPP, the assets remain the property of the government and so are subject to the regulations and processes already outlined. Private programme, which is not at all what this programe is, are driven by the Bureau of Public Enterprises (BPE) and involve a full or partial sale of equity in the asset, thus a transfer of ownership to private parties,” Odaudu said.