FG Explains Temporary Suspension of National Carrier

By Chinedu Eze and Kasim Sumaina in Abuja

The federal government Thursday explained that the national carrier, which was earlier billed to kick off in December was suspended temporarily because the process to actualise it was delayed.

It said the transaction advisers did not complete the process on the modalities for the ownership of the new airline in time and government was able to provide sovereign guarantee to acquire 30 aircraft for the take-off of the new airline.

The Minister of State, Aviation, Senator Hadi Sirika, who made this known, hinted that in recent months, several misinformation, factual errors, insinuations and fabrications have been peddled in both social and print media on the Nigeria Air Project.

These, he said, included desirability, inadequate planning, non-consultation with stakeholders, lack of transparency and publications of fictitious amounts allegedly spent by government on the project, amongst others.

He said Lufthansa, which was the first approved transaction adviser, was rejected due to its outrageous demands which included opening an escrow account, refusal to pay tax and demand for 75 per cent up front payment.

Sirika, who spoke at the 5th Aviation Stakeholders’ Forum in Abuja, also disclosed that another major factor that stalled the process was the inability of the federal government to provide sovereign guarantee for the procurement of 30 aircraft estimated at $300 million in a staggered payment till 2020.

According to the minister, “Estimated funding requirement for the establishment of the project is $300 million up to 2020. Initial start-up capital of $55 million made up of $25 million for deposit for new aircraft and $30 million for working capital from June to December 2018.

“Estimated working capital for 2019 is $100 million. Estimated working capital for 2020 of $145 million to be provided by the Strategic Equity Partners who are expected to manage the project.

“Already, IsDB, AfDB, AFREXIM, US-EXIM, Standard Chartered Bank, Boeing, Airbus, COMAC/CCECC, BOAD, China-Exim, Qatar Airways, Ethiopian Airlines, Deutche Infrastructure Finance, French and US Governments have indicated interest in the project.”

He explained that the name of the national carrier ‘’Nigeria Air‘‘ was obtained by engaging the general public through social media campaign where over 400,000 persons engaged within one week of campaign on facebook and urged Nigerian operators to invest in the planned airline.

He noted that no foreign company was paid $600,000 for the design of the logo as speculated, adding that due process was followed in the branding, which included obtaining ‘’No Objection’’ Certificate with Ref. No.BPP/RPT/18/VOL.1/075 from the Bureau of Public Procurement for the sum of N50,893,000.00 and payment for these services is yet to be made.

He however said that the consortium comprising Airline Management Group Ltd, Avia Solutions Ltd and Tianaero FZE had completed the Outline Business Case (OBC) report and ICRC reviewed the report and issued OBC Certificate of Compliance, adding that the report has been presented to the Federal Executive Council (FEC) for consideration to move to the procurement phase and then Full Business Case (FBC).

Speaking on the transparency of the process, Sirika said: “The processes fully complied with the Public Procurement Act, 2007 and the ICRC Act, 2005; the aviation sector roadmap was presented to stakeholders for inputs and buy-in at several fora; a project implementation management structure comprising inter- ministerial Project Steering Committee and Project Delivery Team were constituted to oversee the project implementation as earlier highlighted.

“The appointment of Transaction Advisers followed due process culminating in Federal Executive Council approval after 13 months.”

On the justification and desirability of the national carrier, the minister said no domestic airline has evolved to fill the vacuum left by Nigeria Airways since it ceased to operate more than 15 years ago due largely to wrong business models, low capitalisation and poor governance structure.

In addition, he noted that only 28 out of Nigeria’s Bi-lateral Air Service Agreements (BASAs) with 83 countries are active on national carrier.

“The national carrier is needed to give impetus to the emergence of Nigeria as the hub for the West and Central Africa, promote reliable air transport services, support the growth of the aviation industry and domestic airlines through infrastructure expansion, traffic/routes expansion and manpower development associated with the national carrier, create employment and compete with foreign airlines for a share of international routes through competitive pricing thereby reducing capital flight,” Sirika added.