After nearly two years suspension, the Federal Government appears set to re-launch the national carrier project, but it is a decision that is not well received by some stakeholders in the industry.
Minister of Aviation, Hadi Sirika, who was at the Senate to defend his ministry’s 2021 budget recently, unfolded the Federal Government’s vision for the aviation sector, with the resuscitation of Nigeria Air, the proposed national carrier, and other critical aviation infrastructure as top priority. The government has earmarked N78billion for the projects.
While the government hinged the decision to resuscitate Nigeria Air, which it suspended in 2018, on its economic diversification quest, job creation potential and contribution to national GDP, some stakeholders have faulted the timing; it comes at a time of lean federal resources and downtime of global aviation. At present, dividends are very low for existing investors as the airline business suffered heavy losses due to the impact of the shutdown of airspaces globally following the outbreak of COVID-19. Most of the leading global airlines have scaled down operations and have sacked workers, including pilots and engineers.
The need for aggressive diversification of the Nigerian economy, no doubt, has gained currency in recent weeks and the government is right in seeking to boost earnings from a non-oil sector, like aviation.
Senior Research Analyst at FXTM, Lukman Otunuga, in a latest forecast saw “a rough and rocky road ahead for Nigeria’s economy” given the impact from recent EndSARS protests, COVID-19 and low revenues from crude oil. He also demanded that the Federal Government take steps to diversify the economy.
“Nigeria’s economy faces unprecedented headwinds in the fourth quarter and in the first quarter of 2021. The challenge is to get through the storm of a weakened economy facing internal and external threats and reach a place where there is smoother sailing. Now more than ever, it is important to keep diversifying the economy and make provisions for a calmer future where Nigeria can recover from its recent trials,”Otunuga said.
Aviation analyst and member, Aviation Round Table (ART), Olu Ohunayo, who supported the need for increased investment in the aviation sector to unlock its full potential for economic growth, however, said resuscitating the Nigeria Air project, with government equity, was not the best option, at present.
“I will not support the Federal Government to establish something afresh, like a new national carrier. I would rather that such money be used in supporting the emergence of a flag carrier from existing local airlines where the Federal Government holds equity,”Ohunayo told Daily Sun in an interview.
Lagos-based economist, Andrew Esegubo, also disagrees with the idea of restarting a national carrier project saying “committing huge capital into a national carrier at a time of lean national resources and struggle to meet other competing basic socio-economic needs of citizens is not the best of priority and makes no economic sense.”
“Even if the intention is right, the timing is definitely wrong; there are better things to do with our scarce resources. There are critical infrastructure like schools, hospitals, roads all over the country in terrible shapes begging for attention. And there is the challenge of hunger and poverty occasioned by COVID-19 fuelling anger among the young people. These are areas that government should divert resources to rather than a national carrier project that the private sector can effectively handle with the right support,” he said.
Cynicism and alleged fraud
Ranked among the most travelled peoples in the world,there is no disputing the fact that most Nigerians would appreciate a strong national carrier. It would be a thing of great joy and relief for thousands of Nigerian air passengers to have an internationally operated airline they can proudly identify with flying into various international airports around the world.
There are about 88 destinations that the Nigerian government has sealed Bilateral Air Services Agreement (BASAs) with, which have remained unreciprocated due to capacity constraints by existing flag carriers and for which it is hoped that a national carrier would effectively reciprocate to end the monopoly of foreign airlines on those routes. At present, an estimated $3billion is lost annually as capital flight from the dominance of foreign airlines in Nigeria, and a vibrant national carrier can cut down the losses.
But as lofty as these sounds, the 2018 fraud allegations that rocked the first attempt to float Nigeria Air by the President Muhammadu Buhari-led administration has continued to create an air of cynicism among even ordinary Nigerian air passengers on the justification for embarking on the project.
There is the distrust that a few who are privileged to be party to the project are out to rake in millions of dollars for themselves as witnessed when in 2018 allegations that over $8.8million was spent on the Farnborough Show in London, UK for the unveiling of the logo and brand name of the carrier, as well as $600,000 spent for the design of the logo of the airline.
It is also alleged that the government invested over N1.2billion on consultants working on the national carrier project and that efforts to attract foreign technical partners for the project proved futile forcing Vice President Yemi Osinbajo to order for its suspension.
Although, Minister of Aviation, Hadi Sirika denied these allegations, the saying ‘there can be no smoke without fire’ appear to hold sway here, not with the secrecy that shrouded the Nigeria Air project before its suspension and the way it ended like any typical white elephant that dots the Nigerian landscape.
Vibrant flag carriers
Implementing the national carrier plan at a time of lean resources, downtime of global aviation, and at an age where national carriers are no longer fashionable globally, therefore, makes to economic sense to most aviation analysts.
The post COVID-19 era has seen credible investors scared of committing funds into the airline industry even as the International Air Transport Association (IATA) continues to press for bailouts for the airline industry.
In Nigeria, the Federal Government recently pledged a N5 billion bailout for its airlines.The Airline Operators of Nigeria (AON) for instance, in querying the rational for investing public funds in a government-owned carrier, said it negated the global trend where flag carriers are the options for nations. A flag carrier is a transportation company, such as an airline, being locally registered and owned private citizens, but enjoying preferential rights or rare privileges accorded by the government for its international operations.
“A national carrier can only result in a huge distortion to the current market and will be a huge drainpipe to government’s treasury,” said Nogie Meggison, CEO Jedidiah Air and former AON chairman.
Meggison, who decried investments in the project in 2018 when it was first muted explained that “setting up of national carrier will cost Nigeria at least $3billon given that a single Boeing 777 costs about $320million.”
“Is it wise and should it be our priority as a nation to take $3billon from the Nigerian coffers today and put into a venture that will for sure go down the drain within a maximum of five years required to establish a National carrier,” he queried.
He estimated that Nigeria Air would need an additional cash injection of $500million subsidy per year on average for the next 10 years to keep the airline afloat while about 97 per cent of the 200 million Nigerian masses today are grappling for the basic necessities of life; food, shelter, electricity, water, education and good roads.
The AON advocated that at a time of national limited resources and struggle to fully recover from economic downturn, what Nigeria needed was a more friendly operational environment and infrastructure support for the emergence of vibrant flag carriers, like Air Peace, to reciprocate its BASAs.
“Today, Air Peace is Nigeria’s largest airline operator with more than 30 aircraft. The Airline has acquired four Boeing B777, with firm order for 10 Boeing B737Max. Medview has gotten one Boeing B777 and another Boeing B767, while Azman Air just received an Airbus 340 aircraft. These are huge positive steps and the biggest growth in Africa that needs government support, better infrastructure, low interest rates, double taxes elimination, fewer levies, better runway landing aids among others as well as encouragement. AON believes government should focus on governing and let the businessmen do the business,” the union said.
Ngozi Nze, a local travel agent who supported the idea of strong flag carriers, said:”We need two or three government backed flag carriers on lucrative routes in Asia, Europe and America to create businesses for travel agents.”
Nze said the entry of Air Peace into regional and international routes had improved fortunes of local travel agents, and demanded that government create the right policies and environment for more private airlines to flourish.
“There is no overstating the fact that, in recent years, private airline operators have stepped up their game, and have contributed significantly in filling the gap created by the defunct Nigerian Airways. Everyone is commending what Air Peace did in evacuating stranded Nigerians from South Africa, and its foray into India, China, Israel, UK for evacuation operations during the peak of COVID-19 pandemic. It would be better, therefore, if the government improved the existing toxic business environment and throws its weight behind local airlines to grow and compete with the likes of Virgin Atlantic, Delta Air Lines, KLM/Air France, Emirates, and Ethiopian Airlines,” Nze said.
Ohunayo of the Aviation Round Table (ART) recommended that Aero Contractors and Arik Air be recapitalised by the government and a new flag carrier established from the two to complement Air Peace in the international market.
“It will not be bad to float a flag carrier to fill the void we have, but what I want to see is the government throw money into these two airlines, Aero Contractors and Arik Air, to start a flag carrier to join Air Peace. These airlines have the market already in Nigeria and West African coast. We can start something big from them. We should not throw money into starting afresh, when we have a situation where Nigerians are being thrown out of work in existing airlines,” Ohunayo said.
To most analysts, the Nigeria Air project is like a white elephant that should not be supported with public funds. What the contemporary nigerian aviation sector required was the government retaining its regulatory role and improving fiscal policies for private airlines to grow their fleet seizes and capabilities to operate into major international routes in Europe, America, Middle East and Asia.
The government, should also ensure that the Fly-Nigeria-Act is passed into law to compel public officials flying international routes to purchase tickets from Nigerian flag carriers on such routes, rather than fly foreign airlines.