Between Nigeria Airways and Nigeria Air -By Simon Kolawole

Anytime Senator Hadi Sirika, minister of state for aviation, spoke about setting up a “national carrier”, I always switched off. Even though I like his ideas — and I still salute his single-mindedness in closing down the Nnamdi Azikiwe International Airport, Abuja, for a critical runway reconstruction last year — I just could not see eye-to-eye with him on the matter of a national carrier. It was going to be a waste of time and resources, I argued. I had evidence. For decades, the Nigerian government has satisfactorily shown that it cannot run any business professionally. There is no single commercial entity run by the government that does well. We always end up burning money.

The defunct national airline, Nigeria Airways, started off so well in 1958 but eventually crashed in 2003 as the Nigerian disease of mismanagement ate it up. Its business class seats were reserved for government officials and their cronies, girlfriends and families — most of whom flew free of charge. That is the way government business is run in our country. Nigeria Airways flew from turbulence to turbulence despite the economic opportunities in the aviation industry. Ethiopian Airlines, Kenya Airways and South African Airways, owned by their respective governments, were doing fairly well but our own Nigeria Airways was descending both in service quality and profitability.

President Olusegun Obasanjo assumed office in 1999 lamenting that Nigeria Airways had 32 aircraft when he left office as military ruler in 1979. Twenty years later, only one aircraft was functional. He promised to revive the airline. I was in the team of journalists that flew to South Africa in 2000 for the signing of a “lucrative” code-sharing deal with South African Airways on the Johannesburg-Lagos-New York route. We were told the deal would breathe a new life into Nigeria Airways. It was only on paper. While SAA is still going strong, our own national airline finally collapsed under heavy debts in 2003 — unable to keep head above water despite subventions and subsidies.

The climax of the sad Nigeria Airways story, as narrated by a passenger, was in May 2002. A New York-Lagos flight was delayed for 24 hours because the airline couldn’t pay for fuel. Passengers had to contribute to fuel the aircraft. One passenger gave a loan of $5,000 to the airline. It turned out to be the last flight. Another sad story is that of the Nigerian National Shipping Line (NNSL), set up by government in 1959. It sank in 1995 under the weight of debts and mismanagement. All its 21 vessels were sold off. With these stories at the back of my mind, I was not excited when the Buhari administration started talking about setting up a “national carrier”.

But I am having a rethink with the unveiling of the Nigeria Air brand on Wednesday. Sirika said the federal government will own only 5% as well as raise the start-up capital for operations to commence in December. He said it is going to be a public private partnership (PPP) to be privately managed. Investors will own the remaining 95%. There is already an international drive to market the venture to partners and investors. The proposed carrier is expected to be a major player in the aviation sector, serving domestic, regional and international routes. The business projection is that in five years, it will be carrying four million passengers and boasting of a fleet of 30 aircraft.

For starters, “national carrier” is not the same as “national airline”. Many commentators are getting the two mixed up. A “national carrier” flies the country’s flag and gets preferential treatment in international operations while a “national airline” is owned by the government. A national carrier, sometimes called flag carrier, does not have to be government-owned. There are different models. For instance, British Airways is the UK flag carrier but it is not owned by the British government. It’s the same for Lufthansa (Germany) and Japan Airlines. But Ethiopian Airlines and EgyptAir are 100% state-owned. Kenya Airways was wholly state-owned until 1996. It is now public-private.

Actually, my interest in Nigeria Air is fuelled by many factors. One, government will not have a say in the management. With 5% stake, it will be a minority shareholder. If the airline runs well, therefore, Nigeria will be reaping dividends rather than burning subventions. We will now have to pray that Nigeria Air will not be managed by the mindless and clueless Nigerian big men and buccaneers who have not the foggiest idea about how the airline business is run. There are too many failed examples in our aviation industry. The success of Nigeria Air will depend on the quality of management. But, to start with, the government will not be involved. That sounds better.

Two, the benefit of solid start-up capital means we can be assured of good aircraft. When Arik launched operations in 2006, its selling point was the “tear rubber” (brand new) aircraft. Despite all its troubles, Arik’s safety record is still intact. That is a benefit of a well-invested capital and maintenance. I once argued that government should invest in businesses that require huge capital outlay in order to spark off investors’ interest. When no investor was interested in building hotels in Abuja, federal government built Hilton and Sheraton, which it later privatised. Can you count the number of hotels in Abuja today?

Three, Nigeria is not enjoying much benefit from its bilateral air service agreements (BASA). For instance, British Airways flies to Lagos and Abuja daily and Virgin Atlantic flies to Lagos also daily, but there is no Nigerian airline flying to the UK. Not even one flight! You are not likely to find this anomaly in many countries with a huge market like ours. According to Sirika, Nigeria Air will fly 41 international routes, in addition to 81 domestic and 40 regional. If anything, virtually every sector of the Nigerian economy should benefit from the business, not forgetting the little matter of job creation in a country direly trying to tackle unemployment.

Four, the fact that government is investing in a business does not mean it is doomed. A ready example is Nigeria LNG Limited, in which government owns 49% but which it does not run. It is one of the best NLGs in the world. If it was run by government, it would have become another NNPC — which is just a sleazy centre for the distribution of political patronage. We have not only recovered our investment in NLNG, we have continued to enjoy the fruits of our seed capital. Therefore, that government is investing in an idea does not necessarily doom it. What makes the difference is who manages it. The government must not have the power to play patronage politics with Nigeria Air.

Five, economists will say everything has an opportunity cost. I agree that the money government is going to invest in Nigeria Air can be used for other pressing needs in education, healthcare, water, roads, bridges, and so on. However, the fact that we need roads and schools does not mean we don’t need to improve options for Nigerian travellers and incentivise competition in the aviation space. We can do many things simultaneously. One does not stop the other. And given the expected multiplier effect, this looks like an investment worth making, all things being equal. It is more than national pride — it is sowing seed in an economic driver.

All said and done, I still have my reservations. Virgin Nigeria was running fairly well until the Nigerian factor ruined it. Its successor, Air Nigeria, was a natural disaster. Arik was considerably successful until it was infected by the Nigerian disease of mismanagement. Our Nigerian “billionaires” are always guaranteed government bail-out whenever they ruin their businesses. The moral hazard encourages bad behaviour. If Nigeria Air ends up in the hands of these buccaneers, then its fall will be mightier than that of Nigeria Airways. Ironically, Nigeria Airways was profitable when it was managed by KLM. Nigerians took over in the 1980s and… (please help me complete the sentence).

Lest I forget, there is still a lot of housekeeping to be done by Sirika. From the comments I have read on twitter, ex-workers of Nigeria Airways are still being owed. In September 2017, President Muhammadu Buhari approved N45 billion for the settlement of their severance benefits. The national assembly did not pass it. This issue has to be resolved before we can start a new carrier. Also, investors are expected to inject between $150 million and $300million over a number of years. We need to know how much in total Nigeria will be committing to it and how the funds will be raised. We can use all the transparency at this stage. Already, the PDP has described it as a scam.

Finally, my understanding is that PPP has three stages — development, procurement and implementation. The idea has been developed. That is what we saw with the unveiling of the brand at the Farnborough Airshow in the UK last week where the biggest guys in the global industry usually gather. The next phase is procurement. Where will we get the funds to pay for the aircraft? Will it a recoverable loan from the federal government? Will we source funds from Exim Bank, AfDB or commercial banks? We need to know. Investors are expected to inject at least $150 million by 2019. Have investors started showing interest? We need answers, Senator Sirika.