Nigerian National Airline: In whose Interest?

Nigerian National Airline: In whose Interest?

Nigerian Newspaper This Day Live examines the clamour for the establishment of a new National Airline:

Chinedu Eze examines the debate for and against the establishment of national carrier, the gains and its effect on existing domestic airlines.

The debate has been rife and involved those who vociferously wanted to have a national carrier and those who don’t wish to have it.

There are numerous gains for a country as large as Nigeria with the most viable air transport market in West Africa and second largest in Africa, after South Africa, to have its own airline and is identified as the country’s airline with all the accoutrements of government support.

The defunct Nigeria Airways

 One, it will be the face of Nigeria outside the country, just like South Africa Airways, Ethiopian Airlines, Air France, British Airways, Lufthansa of Germany, KLM of Netherlands, Egypt Air, Air Maroc of Morocco, Turkish Airline and many others. 

A national carrier will help Nigeria to have better negotiation of Bilateral Air Service Agreement (BASA), it will help develop a major Nigerian airport, like the Murtala Muhammed International Airport as a hub; it will also broaden the image of Nigeria in the comity of nations.

By its sheer size and its prolific air transport market, the CEO of Ethiopian Airlines, Tewolde Gebremariam, told THISDAY recently in Addis Ababa that Nigeria needs two national carriers because of its large travelling public and Nigerians arguably remain the most travelled people in Africa in search of business.

Last week, the special assistant (media) to the Minister of Aviation, Princess Stella Oduah, Joe Obi, told THISDAY that in spite of criticisms about floating a new national carrier in some quarters, majority of Nigerians are really clamouring for it because of its strategic importance in air transport.

But he said that government does not intend to put any money into the project; rather, the Aviation Ministry would come up with a template and criteria on how the national airline would be floated.

The template, he said, would include a framework on ownership structure, but emphasized that it would wholly be private sector driven, but government must have equity investment or stakeholding for the airline to be a national carrier.

“We want to have a national carrier. It is desirable and Nigerians are clamouring for it. Ministry will come up with the template, the criteria for establishing the airline with framework on ownership structure.”

Princes Stella Oduah was quoted to have said, "We’re working on a national carrier that will be publicly owned with limited financial contribution by the government. Government will act as a regulator and provide an enabling environment for this objective to be achieved.”

CEO of Belujane Konsult and former public affairs manager of the defunct Nigeria Airways Limited (NAL), Chris Aligbe looked at the gains of having a national carrier and said that first, Nigeria has to understand the concept on national carrier; that it must deviate from what a national carrier, like NAL used to be.

“It must be run as a private sector concern where government for emergency and grandfather rights reasons must be a stakeholder, but does not own more than 10 per cent equity so that the airline can be called to provide emergency services whenever possible and so that it will also enjoy government protection.”

Aligbe said that it must be private sector driven, but an international airline of repute must hold equity as core investor. This core investor and partner must nurse the airline until it becomes strong and would then be handed to Nigerians to manage; even at that, the core investor airline must retain certain stakeholding.

He gave example with Kenya Airways and KLM, the Dutch airline, which is a core investor of the East Africa national carrier.

“Government must not be involved in the running of the airline and the core investor must be an airline that does not operate in Nigeria presently, like Cathay Pacific Airways and Australian Qantas. There must be legal, regulatory and administrative framework, which will clearly define the mandate of the investors.”

Aligbe said that Nigeria really needs two national carriers that can compete with European airlines that have dominated Nigeria’s airspace, noting that with dominant national carriers capital flights of the nation’s resources would reduce and the threat of making Accra West African hub would be a thing of the past because if the Nigerian airlines take over the high percentage of passengers on international routes, European carrier’s threat of developing a another hub   from Lagos in West Africa would be impossible.

“Nigeria needs two national carriers which can compete with European airlines. This will reduce capital flight and the two airlines will rebuild the manpower needs of the country, which has depleted since the demise of NAL that trained majority of aviation personnel in the country today. Yu will be shocked if you know the number of expatriate personnel in the aviation industry today, especially in the technical area.”

Industry observer and former president of Nigeria Cabin Crew Association, Fidel Olu Ohunayo, in reaction to the report that government would establish a national carrier this year queried, “Is this coming on the heels of absence of Nigerian airlines in the aviation sector , or is it to recover the sold assets of Nigeria Airways or reinstate its workers who one way or another are already professionally engaged, including serving some of the 13/15 Nigerian flag carriers who strongly needed government support and understanding on every factor of operation, ranging from finance to fuel, to manpower, etc?”

He also warned, “We must be wary of any future attempt to favor the new national airline to the detriment of the existing flag carriers similar to the discriminatory treatment doled out by government to the defunct Virgin Nigeria Airways which threw the airline into early crisis that made its principal promoter, Richard Branson to eventually divest his interest.”

Also,  seasoned industry expert and senior official of one of the aviation parastatals spoke to THISDAY on Monday and wanted to know what format of national carrier government wants to establish.

“If you call it a national carrier it means that it is owned by government partly or wholly. If government wants to have interest it will not conform with the global trend and the global trend is that government is divesting from business and allow private investors to operate because they know how to run business better.”

The source observed that there are some countries that have successfully managed a national carrier, like Singapore but noted that the environment is different, emphasizing that a country’s environment and culture determines whether a national carrier could be run successfully or not.

In Nigeria, the source was not so optimistic. “Can government run business successfully in Nigeria? I am yet to see a business that government is running very well in this country. But probably the reason why government may want to have a national carrier is to maximize the benefit from the aviation sector, but can’t this be achieved with the privately owned airlines?

“Most Nigerian airlines are right now going through financial stress, so government should look at a way of boosting capacity of the existing carriers. Probably government believes that if it established a national carrier it will be calling the shots, but this is dicey because government may not be able to sustain a national carrier.”

Right now the owners of existing flag carriers in Nigeria under the aegis of Airline Operators of Nigeria (AON) seem to oppose the establishment of national carrier because from hindsight such establishment would threaten their existence. Past experience show that while the national carrier takes government attention and patronage, it largely does not have the capacity to provide all the needed air services in Nigeria; yet, the national carrier usually threaten to eclipse the private operators.

The source said that the fears of the airline owners are real.

“If you look back, their fear may  be unjustified. If you look at the time of Nigeria Airways, the airline could not maximize the potential that was on ground then and yet would not allow a private operator to explore the opportunities it could not maximise. Once an airline is called a national carrier it now begins to exert so much control and influence over the government and they would be seen as the only carrier and all other carriers would not be adequately protected and adequately catered for.”

On the issue of BASA, the source said the national carrier would claim ownership of BASA and would want to operate so many international routes which it may not have the capacity to operate, but would not be willing to allow the other operators to take over.

The source observed that all over the world the reason why airlines are kicking against the idea of national carrier was because the nation’s money is used to prop up an airline, which enjoys such unlimited patronage and at the same time it is competing with other local airlines that do have the financial trappings and protection in the same market. So that privately owned commercial airlines, which may have higher capacity are put at disadvantage.

“Also a government subsidized carrier can lower its fares and have undue advantage against the other airlines it is competing with. And this is what the airline owners are kicking against; unless government has a way of assuring other operators who are investing their money, that they would be protected.”

CEO of Sabre Network Incorporated, West Africa, Gabriel Gbenga Olowu, said that Nigeria presently has10- 13 flag carriers, including  Air Nigeria, Arik, Aero, Chachangi, Dana, IRS,KABO, etc. that are not government owned but established through private investors, noting that it is a commendable development.

Olowu however remarked, “Our airlines are weak in competition, highly indebted and needed sound and genuine government support for continued survival.”

He said that Nigerian airlines need financial bailout through debt forgiveness, observing that low cost intervention funds by government to service debts is not the way forward because such funds cannot address fuel needs ,fleet renewal ,insurance and other basic items.

“Cases abound world over where governments rose up to bail out its critical businesses among which aviation is paramount. Sept 11 and global economic meltdown US remedies remain very fresh. Our airlines need economic bail out. Bilateral Air Services Agreement (BASA) which yields negative balance of trade must be reversed. Our airlines must cooperate for competitive advantage. Since it is unAfrican to merge , economic regulation should make this happen. Given 3-5 years ultimatum, airline with less than 50 airworthy aircraft in its fleet ceases to operate.”

Olowu said that this would force the airline coalesce  into 4-5 mega operators with obvious synergies of doing so, adding that Nigerian airlines must invest in modern aviation technology for distribution, engineering, revenue, crewing ,etc and depart from rule of the thumb approach of the past.

“One man one airline syndrome will lead an operator to disaster,” he emphasized.

Ohunayo queried, “Why is a national carrier needed? To absorb employees of failed major carriers by providing employment and assuages nerves of restive unions or to act as a means of providing additional fleet, capacity, and frequency in support of other registered carriers or to fill a vacuum and avert the monopolistic tendencies of surviving airlines.”

He argued that the first scenario has been overtaken by events while second and third are the crux of the present agitation for another national carrier, considering the present set of flag carriers have not done anything to reflect national ownership like their counterpart in the banking industry which naturally muster public support and protection.

“Also they are floundering with suffocating debts, with the international routes and frequencies that should be money spinners apparently controlled by foreign airlines. We also lack undiluted low cost carriers, adequate regional jets or props services, finance and a regulated consolidation regime that will bolster the critical mass of our carriers and improve passenger enplanement to the benefit of all stakeholders in general and the economy in particular.”

Ohunayo reasoned that “if we must have a national carrier, then we should ponder over the cost, risk and lessons from other climes, also we should dust the report of the International Finance Company that was contacted to work out modalities of a new carrier in the early days of the present democratic setting.”

But an enlightened Nigerian is stung with envy when he sees national carriers of European and African airlines come to feast on our passengers daily and consolidating their profits from the Nigerian passengers. It is really natural to feel that if Nigeria has a national airline it would benefit enormously from the growing Nigeria air travel market.

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