Why Criticism over National Carrier Persists

Nigerians looked up to having a national carrier as a way to counter the dominance of country’s international routes by foreign airlines. However, industry stakeholders are miffed because of the ownership structure of the new carrier. Chinedu Eze writes that government cannot wish these criticisms away.

Since the federal government confirmed THISDAY’s exclusive report that it had selected Ethiopian Airlines as its core investor/ technical partner in September, barrage of criticisms from industry stakeholders and other Nigerians have followed the decision to choose a foreign airline. This is because the federal government gave Ethiopian Airlines 49 per cent of the stakes.

Many of the critics of government’s decision said that with such controlling share domiciled in a foreign company, it means that Nigeria Air is largely owned by Ethiopian Airlines. This is given strength when reports indicated that the East African carrier and the most profitable airline in Africa, listed Nigeria Air as one of its subsidiaries.

Some other Nigerians who frowned at the partnership also argued that Nigeria has come of age to grow its own national carrier without foreign assistant, insisting that if government gives support to domestic airlines like Air Peace, Arik Air and others, they could grow to become very strong flag carriers and carry out the duties of national carrier, which some of them have been doing for the federal government.

Dominance

Also, there are fears that establishing national carrier as presently constituted, the federal government may unwittingly be eclipsing Nigerian airlines, which have given thousands of Nigerians jobs and have contributed immensely in the economic development of the country.

The fear that government may want to use the national carrier to drown domestic airlines became apparent; that THISDAY in 2018 reported that investors in the industry were apprehensive about government’s plan to establish a national carrier.

The investors had insisted that an airline with government input and support would be given more advantages over the exiting carriers that the operating environment would become uncompetitive.

“Industry analysts say the fear may not be unfounded because there is no guarantee that government would provide level playing ground for both the airlines owned by these entrepreneurs and the one that would be established by the federal government, despite the promises of equal opportunities.

“That fear became exacerbated when these operators noticed that aviation agencies chief operating officers have been included in the committee that would spearhead the actualisation of the new national airline. This has given rise to the question: after giving this new airline a head start, won’t these government agencies also give it undue privileges at the expense of already existing airlines owned by private investors?”

The above sentiments have been confirmed by the now birthed Nigeria Air, which has already been given special operating facilities at the nation’s busiest airports, the Murtala Muhammed International Airport, Lagos and the Nnamdi Azikiwe International Airport, Abuja.

Stakeholders have excoriated the federal government and alleged that it is short on details, noting that it did not explain the ownership arrangement, giving details about who owns what, as many Nigerians said that 5 per cent stakes by the federal government is too small when it is obvious it is midwifing the airlines, including the funding.

Domineering Advantage

Many Nigerians who criticised the partnership between federal government and Ethiopian Airlines and frowned at the partnership arrangement and the tardiness of this arrangement, not particularly against the East African carrier, which has been operating to Nigeria for over 65 years.

At a webinar organized recently by Avaero Capitals Partners with the theme: ‘Nigeria Air-The Solution to Nigeria’s Aviation Problems,’ the CEO of Top Brass Aviation Limited and former Managing Director of the Nigerian Airspace Management Agency (NAMA), Captain Roland Iyayi, noted that the entire process of selecting a strategic investor for the Nigeria Air and all issues surrounding the carrier has been shrouded in secrecy. He observed that certain individuals are setting up an airline using government as a face and this must be stopped before it is too late.

He remarked that although it has been agreed that the country needs a national carrier to reciprocate all Bilateral Air Service Agreements BASAs) routes but the manner and the process adopted thus far is wrong.

“This is an airline being set up using government as a face but owed by private individuals that is my contention and I think on that basis, it should be stopped and a more transparent process should be put in place because there is a need to reciprocate all our Bilateral Services Agreements, and Multilateral Agreements in different countries but it should be done in a way that gives the benefits of commonwealth to all and not to a few”.

Iyayi also noted that having a partner is not bad but certainly not a competitor that already has a stronger footing in the African market than Nigeria, remarking that Ethiopia has always eyed the Nigerian market with the many attempts made in the past to have a strong stake in it, citing the Ethiopian Airlines approach to Air Peace for a partnership and being a clog in the will of progress when the management of the airline allegedly blocked Arik Air from operating into Ethiopia.

“Ethiopia will never allow a Nigerian carrier to come to Ethiopia to compete. They are not stupid; they know what they are coming to do and they know exactly what they want. And for the records, Ethiopian approached Air Peace to have a footprint in the domestic market in Nigeria, such that they were willing to pay Air Peace royalties, Ethiopian tried the same thing in 2018 with Ghanaian Authority and they were thrown out. So the point is, if Ethiopia with all the antecedents in 2017 they blocked Arik Air from flying into Ethiopia, they did the same thing again to Air Peace in recent times so; if they are doing all of this to protect their own market and for us to now say come into our market with unfettered access, I believe this is the worst thing that can happen to the Nigerian aviation industry.

“I believe the process till date is not transparent, it is shrouded in secrecy all through and the so-called Nigerian investors MRS and SAHCO are not really investors, they are just names presented by the Government to say we have other people, Sovereign Wealth Fund, was supposed to be part of this as soon as the announcement was made within an hour of that announcement the sovereign wealth fund came out that they had nothing to do with it. Invariably this tells me that something is not right with the entire process.”

“Let’s go back to the preamble of the ICAO Convention, it talks about the fact that whilst it is good to encourage friendships with other nations and if that is viewed it will become and can become a threat to national security, l see what is being done presently by this administration to be a threat to the national security of the country, I also see it as a way to decimate the domestic market such that they are trying to give a dog a bad name just to hang it. They have said all sorts of things about Nigerian airlines; I disagree with them. If any of them were astute enough as a business person, I would have expected that with the expertise they are propounding, they would have set up an airline”.

Threat

President of Aircraft Owners and Pilots Association of Nigeria, Alex Nwuba said in recent interview with Arise TV that the domestic airlines have an argument against the way the national carrier was established. While speaking during global business report programme, he said, “The airlines and the industry is not in disagreement with the concept of a national carrier, they are just in disagreement with the attempt that is being made to achieve it. A poll was done recently and Nigerians were asked if we need a national carrier and 76 percent of those who voted said we do. The second question is if the carrier should be foreign owned and over 90 percent said no. The airlines are concerned about capital flight. Nigeria is a large travelling market and would love to see a Nigerian carrier flying Nigerians especially for the pride that comes with it.

“The government already owns three airlines as we speak; Arik Air, NG Eagle and Aero Contractors and they could have converted any of those airlines into a national carrier and that would have overcome the excuse the government is having for Ethiopian Airlines being that if we started a national carrier today, it would have to operate for two years to fly internationally, which is the aim. The government also has the option to work with existing private airlines to establish operations for them. Airlines like Air Peace has equipped itself by buying long haul aircraft but it is not able to do that because the bilateral air service agreement under which it would fly is not being pushed by the government for other countries to open up those opportunities for Nigerian airlines, whereas other airlines are coming into multiple airports in Nigeria. So, there is not much capacity for the domestic airlines to carry. We should develop our airlines from within; that is what people are expecting.

“There is no benefit for Ethiopian Air coming in. The only reason why Ethiopian Air is coming in is because it wants to dominate the African market, it is not so much to dominate the African market to fly within Africa, they want to take advantage of the BASA agreement between individual countries, that is why they are already in a number of countries providing air travel for international flights. I don’t think there would have been opposition if Ethiopian themselves said they would want to enter into the market without government support, then they would operate like any other airline. The problem here is that this is a government supported international airline. What would that airline do? Since its mission is to dominate the international airspace, what we would then do is to employ a red ocean strategy, make the domestic market a loss leader, then carry all of the international flights out of Nigeria under the BASA,” Nwuba explained.

Roots of the Problem

THISDAY gathered that many stakeholders who criticise the Nigeria Air deal did not have any doubt about the capability of Ethiopian Airlines to deliver on its mandate but expressed doubt about the process and shareholding.

The Principal Managing Partner, Avaero Capital Partners said the whole process of establishing the national carrier was questionable and traced the failure to Nigeria’s aviation policy.

“We do not have a long term Nigerian Aviation Policy which has determined what type of aviation industry we need to build for Nigeria, now and in the future. So we are taking decisions today, which may not align with the needs of Nigeria going forward. I would take a step back and look at the industry with a critical eye, look at what needs to be done to make the existing sector work better. It does not make sense to scrap where we currently are due to poor performance or underperformance when the reason the industry is under performing is structural,” Foster said.

Reiterating the hostile operating environment, she observed that no airline can operate successfully in Nigeria’s air transport environment without reliable and affordable supply of aviation fuel and lack of availability of forex to buy spare parts, pay for maintenance and other dollar expenses such as aircraft leases, adding that no airline can make money when their assets are underutilised due to short opening hours with many of the airports designated as sunset airports that offer limited hours operating window.

“No airlines can overcome delays caused by occurrences outside of their control such as VIP movement, bad weather, bird strikes, etc. These are inevitable and are within the ambit of the aviation authorities to do something about,” she said.

The nostalgia of many Nigerians that whetted their appetite for national carrier has waned over what was finally birthed as their own. They are now in a dilemma whether they actually have a national carrier or a subsidiary of a successful airliner.