Failed Promises of Airport Concession

As far back as 2015, the federal government promised to concession the airports under public, private partnership, but 10 years on, it has so far failed, writes Chinedu Eze

Looking back to the promises made by the former Minister of Aviation, Hadi Sirika, that the Buhari’s administration would concession Nigerian airports, one would have thought that major airport terminals in the country would have been concessioned, at least five years ago. But going into the second year of a new administration of the President Bola Ahmed Tinubu, and 10 years of APC’s rule since 2015, no new airport terminal has been concessioned. The last was the one carried by the Bi-Courtney Aviation Services Limited (BASL), which started operation in 2007.

Sirika, known for his un-kept promises when he was in office, had outlined business case, which was an effort to bamboozle the citizens over his bogus concession and national carrier plans. He made all the promises without the realisation of either a national carrier or airport concession. One recalls his trite promises, when he had said: “The transaction advisers for the concession have finished the Outline Business Case and had got the Request for Qualification. We’ve pre-qualified the people and they’ve been issued Request for Proposal. They have turned the proposals in and we are analysing them to announce the successful bidders and this will be soon. Our timetable is for the first quarter of this year.”

That was in March 2022, but at the end, nothing happened.

Many industry observers are of the view that there are key issues that may have detracted government from acutualising the airport concession programme. One was genuine intention and the other was looking to have foreigners as concessionaires without looking inwards to seek an investor or investors within the country. There were also speculations that under the former administration there was intention of the prosecutors of the planned concession to take a large chunk of the stakes, which would have been difficult to do if the concession were given to local investors.

Successful Airport Concession

Going by the report from the Minister of Aviation on airport concession in 2020, presented by the then Minister of Aviation, Hadi Sirika, the Nigerian airport concessions would be a terminal concession (passenger andcargo) and majority of its revenue will be derived from non-aeronautical sources.

“All other facilities at the airports will still be managed by the Federal Airports Authority of Nigeria (FAAN). Our airports are national security assets. This must be kept so. The Concessionaire(s) will provide the investment required to upgrade the existing terminals, take over the new terminals and maintain them over a period of time to be determined based on financial assessment of each transaction. Passenger Service Charge and Security Charge will be shared by FAAN and the Concessionaire(s) and FAAN’s share of the charges shall be paid directly to FAAN by IATA (the International Air Transport Association),” he said.

Despite the pretenses about attracting foreign investment, it is obvious that direct foreign investment (FDI) is very low in Nigeria due to skepticism, ranging from insecurity, policy summersault in government and hostile operating environment. There are also views that the major reason why the Buhari administration failed to concession the airport terminals was because foreign investors were really not interested in investing in airport infrastructure in Nigeria. They were also not keen in investing in the national carrier and that contributed to the failure of the two projects. But the only terminal concession that has worked in Nigeria, midwifed by the federal government was that of Bi-Courtney Aviation Services Limited, an indigenous private sector driven investment.

The Challenges

Nigerian airports, for many years, have been a tale of two cities: those grappling with underfunding, dilapidated infrastructure, and subpar service, and then there’s Murtala Muhammed Airport Terminal 2. Managed by Bi-Courtney Aviation Services Limited, MMA2 stands as a beacon of hope, a testament to what can be achieved through effective public-private partnerships in the aviation sector. While airports like Gombe, Ibadan, Kano, and Kebbi struggle to meet basic passenger needs, MMA2 thrives, offering a stark contrast and a blueprint for the future of Nigerian aviation.

The challenges facing many Nigerian airports are numerous and well-documented. Underfunding is a chronic issue, leading to a dearth of investment in critical infrastructure upgrades. Aging terminals, dilapidated runways, and inadequate facilities are commonplace. This translates into long queues, delayed flights, and a generally subpar passenger experience. Security concerns further compound the problem, hindering the smooth flow of air travel.  

Recently the Federal Airports Authority of Nigeria stated that it requiresd over N580 billion for the rehabilitation of runways of the 21 airports under its management.

The Managing Director of FAAN, Mrs. Olubunmi Kuku, in a recent event explained that the runways of the airports built in the late 70s have outlived their life span and need total rehabilitation.

“N580 billion is required to fix runways across all airports, their life span is between 20 to 25 years but most of the airports were built in 1978. Many of FAAN’s facilities, including terminals and runways, are aging and in need of significant repairs and upgrades. This affects operational efficiency and safety, and necessitates substantial investment for modernization,” she said.

She also said that obsolete equipment such as old fire tenders, generators, air conditioning systems conveyor lines with worn-out slats, belts and motors, can be found in many airports that have low efficiency and have high maintenance cost.

According to Kuku, FAAN plans to modernize airport infrastructure by renovating terminals, expanding runways, and upgrading navigational aids, disclosing that in 2025, the construction of a new and befitting headquarters for FAAN would also be a top priority, providing a centralized and modern facility to enhance operational efficiency. But the challenge over the years has been dearth of funds for the agency, hence the call for concession of terminal facilities at these airports.

The MMA2 Example

The concession of the domestic terminal of the Murtala Muhammed International Airport (MMIA), Lagos, known as MMA2, has remained the most success terminal concession in the history of Nigeria. In nearly two decades of operation under Bi-Courtney Aviation Services Limited, MMA2 has consistently maintained its reputation for efficiency and excellence. The terminal continues to stand out with its modern facilities, streamlined passenger processing, and unwavering commitment to enhancing the overall travel experience. Strategic investments in infrastructure have ensured sustained improvements in passenger handling capacity and a comfortable travel environment, reinforcing its status as truly ‘more than a terminal.

The success of MMA2 can be attributed to several key factors. Firstly, the concession agreement between Bi-Courtney and the federal government provided a clear framework for operations, outlining responsibilities, performance metrics, and a mechanism for dispute resolution. Secondly, Bi-Courtney’s expertise in airport management and operations has been instrumental in driving operational efficiency and enhancing passenger satisfaction.

Passenger’s Experience

Furthermore, MMA2 has prioritised passenger experience, investing in amenities like comfortable seating areas, efficient baggage handling systems, and a variety of dining and retail options. The terminal has also implemented robust security measures, ensuring the safety and security of passengers and airport personnel.  

Beyond operational efficiency, MMA2 has also demonstrated a commitment to continuous improvement. Ongoing investments in infrastructure, technology, and customer service have ensured that the terminal remains competitive and responsive to the evolving needs of the aviation industry.

However, the success of MMA2 is not merely a testament to private sector expertise, as it also underscores the importance of effective governance and a conducive regulatory environment. A clear and transparent regulatory framework is crucial for ensuring that public-private partnerships in the aviation sector are successful and sustainable.

The challenges faced by other Nigerian airports highlight the critical need for a comprehensive overhaul of the aviation sector. This necessitates a shift towards more effective public-private partnerships, streamlining regulatory processes, and prioritizing passenger experience.

The MMA2 model provides valuable lessons for the future of Nigerian aviation. By replicating the successes of MMA2 at other airports across the country, Nigeria can unlock the potential of its aviation sector, improve connectivity, boost tourism, and drive economic growth.

The future of Nigerian aviation hinges on the ability to learn from successes like MMA2 and implement similar models across the country. By fostering a more conducive environment for private sector investment, prioritizing passenger experience, and investing in critical infrastructure, Nigeria can transform its airports from liabilities into assets, driving economic growth and enhancing the nation’s global connectivity.

Drawbacks

One of the major drawbacks of the airports managed by FAAN is the inability of FAAN management to fully exploit the non-aeronautical possibilities at the various airports in the country. The Aminu Kano International Airport, Kano, for example, is located in a vast territory that can host all kinds of businesses, from manufacturing concerns, hospitality facilities to supermarkets and other businesses that provide different services. These businesses will pay charges to FAAN, which will also generate revenues from toll and parking services.

FAAN can generate huge revenue from outdoor advertising, which has not been fully utilized by the agency. 

BASL has used the small space at its disposal to bring in a lot of businesses and fully maximized its facility for outdoor advertising. The terminal has been described as a good example of airport concession.

A statement from the company disclosed that the terminal hosts over 90 businesses and it embodies modernity and stands as a testament to Nigeria’s economic vitality.

“MMA2 is often hailed as the pride of Nigeria’s aviation sector and has emerged not just as an international standard airport but as a vibrant aerotropolis center, home to a burgeoning community of more than 90 businesses.Located in Ikeja, MMA2 has redefined the landscape of air travel in Nigeria, offering passengers and businesses alike a world-class aviation experience,” said the company recently.

The company noted that from its facilities to its seamless operations, MMA2 has become a beacon of efficiency and excellence in Africa’s aviation industry, stating that at the core of MMA2’s success is its commitment to innovation and customer experience.

According BASL, MMA2 is a terminal designed to international standards, where travellers are greeted with modern amenities, streamlined check-in processes, and a plethora of retail and dining options and a testament to this, is the recent opening of Guiness bar within the terminal.

“However, what truly sets MMA2 apart is its role as a thriving aerotropolis center, a dynamic urban environment where aviation-related businesses thrive and interact with the broader economy. With over 90 businesses operating within its premises, ranging from airlines and ground handling services to retail outlets and corporate offices, MMA2 has become a bustling ecosystem of economic activity,” BASL said.

Need for Concession

The CEO of Financial Derivatives Company Limited, Bismarck Rewane, had once said that to attract private investment and boost profitability, government must concession airport infrastructure.

Rewane insisted that investment in infrastructure and airport concessioning is needed to reduce average cost and increase profitability, noting that currently, travellers are contending with airports with obsolete infrastructure, which slows down passenger facilitation, diminishes profitability and discourages private sector investment because airport management is still under government, which has limited resources to fund modern airport facilities.

If MMA2 has been acknowledged by both users and industry regulators as the most functional and state of the art airport in Nigeria; government should not continue to wait for foreign investors when Nigerian private sector can build, operate and maintain efficient airport facility.