Nigeria Air: Uncertainty trails new national carrier

By AYOOLA OLAOLUWA

The fate of Nigeria Air currently hangs in the balance as aggrieved aviation stakeholders daily mount legal landmines that may delay or even scuttle the takeoff of the new national carrier, Business Hallmark can report.

The Minister of Aviation Minister, Hadi Sirika, had on Friday, September 24, 2022, announced Ethiopian Airlines and a Nigerian consortium as new owners of the new carrier, raising fresh hopes of another national air carrier replacing the defunct Nigeria Airways.

Under the terms of agreement, a consortium led by Ethiopian Airline will own 49% of the airline, a local consortium of Nigerian companies led by SAHCO, owned by the SIFAX Group and MRS 46%, while the Federal Government will mop up the remaining 5%.
According to the minister, a contract will be negotiated between the consortium and the FGN, leading to a Full Business Case which will be presented before the Federal Executive Council for approval.

“The overall share capital of around US$300, will be provided by the preferred bidder that will launch Nigeria Air to its full size of 30 aircraft and international operation within the next two years.

“Nigeria Air will be launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market and will launch with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between these two major Nigerian Airports. Other domestic destinations will follow thereafter.

“A signature-ready contract has been finalized with Ethiopian Airlines for the three Boeing 737-800 with a 16 Business Class and 150 Economy Class configuration,” the visibly elated Sirika had announced.

However, the announcement has continued to be greeted by multiple obstacles, including fierce opposition from aviation stakeholders.
The stakeholders, while speaking to BH in Lagos, had queried the decision of the Federal Government to cede 49 per cent stake of Air Nigeria to a foreign airline, when the carrier supposed to be owned by Nigerians.

“How can the government cede control of what supposedly should be our national heritage to a foreign entity? To worsen the matter, Ethiopian Airlines is a competitor in the nation’s air transport market, competing against local airlines for market share.

“Already, Ethiopian Airlines currently flies into five Nigerian cities of Abuja, Lagos, Kano, Enugu and Kaduna. Making it a national carrier will be counterproductive.

“What stops the airline (Ethiopian) from running the likes of Air Peace out of operation so that it can monopolise the market? I pray they prove me wrong, but I think it is a disservice to indigenous carriers”, an aviation engineer who did not want his identity told our correspondent.

Nigerian aviation experts also faulted the airline as one of its six subsidiaries on its website.
The categorization of Nigeria Air as subsidiary of Ethiopian Airlines, experts argued, could be likened to the tail wagging the dog, instead of the other way round.

“Nigeria Air is regarded as the new national carrier and the nation’s flagship. How come a relatively smaller country is referring to it as one of its subsidiaries? In other words, the airline belongs to Ethiopian Airlines, solely owed by the Ethiopian government and not Nigeria since the government only has 5% equity in the carrier.

“I think it is a joke. A slap on our faces and denigration of national pride. What stops us from framing the agreement the way the Nigerian Liquefied Natural Gas Limited ( NLNG) deal was framed?

“NLNG is an Incorporated Joint Venture (IJV) owned by the Nigerian National Petroleum Company Limited (NNPC) 49%; Shell Gas B.V. 25.6%; TotalEnegies Gaz and Electricité​ Holdings 15% and Eni International N.A. N.V. S. àr.l 10.4%.

“Despite Shell, Eni and Total owing a combined equity of 51 and the NNPC owing the remaining 49%, they never referred to NLNG as their subsidiaries.

“Yet, the entity is privately managed. No government interference. Why not adopt the NLNG arrangement instead of causing us this national embarrassment?”, demanded a other stakeholder.

Apart from the issue of national pride, the decision of the Federal Government to allow the new airline operate on domestic routes, has drawn the ire of domestic operators who argue that the concession will give undue advantage to Ethiopian Airlines which already fly directly into five Nigerian cities.

According to Captain Olabode Elliot, a retired pilot with the defunct Nigerian Airways, allowing Ethiopian Airlines to fly direct into Enugu, Abuja, Kaduna, Kano and Lagos is an anomaly.

“All over the world, countries protect their indigenous airlines by not allowing foreign carriers fly directly into more than two cities, the political and economic capitals.

“That literally gives room to local players to operate without needing to worry about competing with bigger and more established foreign airlines. This also guarantee the survival of indigenous airlines.

“However, Ethiopian Airlines and some others are allowed to fly directly into five cities from abroad. By the time the new carrier comes on board with newer and wider body aircraft that can carry more that 200 passengers at a go, most, if not all local airlines will close shops”, Elliot warned.

Also, foremost aviator, Group Captai John Ojikutu (retd), kicked against the choice of Ethiopian Airlines as the core investor in the new airline.

“I am not in support of having any foreign airlines and a competitor with us on the Bilateral Air Services Agreement (BASA) routes as our technical partners. The foreign airline’s interest in the partnership comes before ours.

“Secondly, similar partnerships with the KLM and the SAA in the early 90s did not benefit us. We should, therefore, look for partnerships outside the competitors in the BASA routes in countries like Canada, Australia,” Ojikutu advised.

Meanwhile, the plot against the new airline recorded a major boost on Tuesday, November 15, when local airlines under the aegis of Airline Operators of Nigeria (AON) secured an interim order of a Federal High Court in Lagos restraining the Federal Government from selling the shares of Nigeria Air to Ethiopian Airlines.

The injunction was given in a suit filed by the registered trustees of AON, namely Azman Air Services Limited, Air Peace Limited, Max Air Limited, United Nigeria Airline Company Limited, and Topbrass Aviation Limited, marked FHC/L/CS/2159/2022.

AON listed Nigeria Air, Ethiopian Airlines, Minister of Aviation, Hadi Sirika and Attorney General of the Federation, AGF Abubakar Malami as defendants.

In his ruling, Justice A. Lewis-Allagoa granted an order of interim injunction restraining the Federal Government from executing the proposed or draft agreement of the establishment of a national carrier between Ethiopian Airlines and Nigeria.

BH findings revealed that the matter might not end soon, as contending parties are digging in and are determined to fight to the bitter end, thus endagering the future of the new carrier.
Sources in AON informed our correspondent that members had resolved to take the case as far as the Supreme Court if they didn’t get favourably judgments in lower court.

A top member of AON and Chief Executive Officer of Top Brass Aviation Limited, Roland Iyayi, explained that domestic operators opposed the present structure because it is against Nigeria’s interest.

“What we are saying is that the structure and the design that is being put together currently by the minister of aviation is a bit of an issue which we believe is not going to help Nigeria in the long term.

“The minister has come out to tell us that this is intended to be a public-private partnership. And indeed if that is the case, we have a situation where we need to query, as a matter of questioning all the issues that have happened to date.

“For instance, the government is proposing, or the minister is proposing to have a 15- year tax moratorium on the national carrier. And again, let’s be very clear; this is not a national carrier in the context in which it is being presented; this is a flag carrier.

“Simply because if you are bringing in a strategic investor at 49 percent stakes and you have all the institutional investors one of which is 60 percent owned by a foreign entity, in the long term what you are putting together is a foreign airline being allowed to come into the Nigeria airspace to operate, which is at variance with Article 7 of the International Civil Aviation Organisation (ICAO) convention, which is a cabotage,” Iyayi argued.

The AON boss further stated that the structure of the planned national carrier was not in the overall interest of Nigeria but to benefit individual interest groups and foreigners instead of Nigeria.

“There will be unfair competition if you allow a new carrier to come in with special privileges that the other carriers are not getting. Again we have a situation where if you look at what the outline business case has presented, it will appear to us that this whole process will end up in a contrived outcome because it would appear that the choice of Ethiopian airline was already decided even before the process started”.

Iyayi vowed that AON would take the case to the Supreme Court to drive home its points.
While AON members are refusing to back down, the Federal Government is doubling down in its quest to bequeath a national carrier to the nation at all cost.

Reacting to domestic operators insistence on scuttling the new national airline as presently constituted, the Minister of Aviation, Hadi Sirika, insited that nothing can stop its takeoff as the government is forging ahead with the carrier.

Sirika berated aviation stakeholders and unions for waiting till this moment to engage in legal suit to stall the project when they had more than enough time to participate in the process.
According to the embattled minister, he personally engaged domestic operators, especially Air Peace, to participate in the project, but they rejected the gesture.

“I am not aware that anyone is in court. I don’t have any court paper; otherwise, I am not interested. I cannot see any rational court that will say that I am stopping somebody from establishing a company because Nigeria Air is a limited liability company known to Nigerian laws in the Corporate Affairs Commission (CAC).

“If anybody wants to come and invest in the company, there is no law in Nigeria that stops him from doing so. If there are foreigners coming to invest, nobody stops them from investing.

“You can own a company 100 percent. What would you say to Shell, Unilever and Julius Berger? There are companies in Nigeria registered by Nigerian law and people are coming to invest. This is what we want. We want Foreign Direct Investment (FDI),” Sirika maintained.