Monday, July 23, 2018 12.30PM / Otto Abasiekong of WebTV
Last week Wednesday, July 18, 2018, the Minister of State, Aviation; Captain Hadi Sirika at the Farnborough International Public Airshow in London, announced the planned launch of a new national carrier “Nigeria Air”.
This comes fifteen years after the former carrier Nigeria Airways Limited was shut down as an entity in the country. Since then, Nigeria has made several unsuccessful attempts to work out a national carrier, which has not turned out sustainable or achieved the end goal.
In this news story, we bring you five (5) key things to note from the “Nigeria Air” development as it relates to airlines within the context of the Nigerian Aviation sector; as represented from government commentaries.
December 19, 2018 Launch Date
The planned launch date according to the Minister of State, Aviation for the new national carrier “Nigeria Air” is December 19, 2018. This will also follow with the unveiling of the logo which is green and white the Nigerian colours, a prelude of which has been provided last week.
From July to the December date of the “Nigeria Air” launch and logo unveiling, Governmnet hopes to sustain engagements with stakeholders in order to provide much needed clarity and further developments.
Take off Capital to be between $150m to $300m
Giving further insight into the planned launch of the new national carrier “Nigeria Air” Captain Hadi Sirika informed stakeholders in London, that in the area of capital investments requirements; the initial capital is likely to be in the range of $150m to $300m invested in tranches over time from start up through the first five (5) years of operations. The Government will provide an initial capital (amount yet to be disclosed) and will facilitate the process for opening up the capital of the airline to private sector financial investors.
A PPP with Government holding a 5% stake
According to the Federal Government, the “Nigerian Air” will be a Public-Private Partnership (PPP) process, managed by a private operator without interference. The stake of the government in the new national carrier will be no more than a 5% holding.
FG Discussing with Top Airlines
With plans to serve the domestic and international markets, with key hubs in Lagos and Abuja the Minister of State, Aviation Captain Sirika in a recent interview with CNN, said there are on-going discussions with leading Airlines across the globe (including but not limited to Qatar Airways and Singapore Airlines) on the national carrier.
Revitalizing the Aviation Sector and the Economy
The aviation sector in Nigeria has been challenged for decades and the planned launch of the “Nigeria Air” national carrier the Minister believes will revitalize the aviation sector, with job opportunities, manpower training and new investments in the Nigerian airspace. It will also provide the platform for Abuja and Lagos to compete with other international destinations as strategic aviation hubs and gateways. The outlook is that in the next 5 years it will be carrying four (4) million passengers and looking at achieving a fleet of thirty (30) aircrafts.
Nigeria Air – FAQ Culled From Commentaries
Q: Who are the owners of the 95% equity?
A: The 95% will be owned by “strategic investor(s)” and the “general public”.
Q: Why is the ownership shrouded in secrecy?
A: No secrecy. The entire process is guided by the Infrastructure Concession Regulatory Commission (ICRC) guidelines/regulations. Because it’s a “PPP”, it has “3 stages” viz: the project development stage, procurement stage and the implementation stage.
The project development stage was just concluded with the approval of the Outline Business Case (OBC), for which the ICRC issued a certificate of compliance. At the moment, the OBC is awaiting FEC approval. Once the process gets to the procurement stage, there will be a RFQ and RFP bidding process which will be made public, competitive and transparent. Shares will be set aside for the Nigerian public (via an IPO). All ownership issues will be made public. As it stands now, it’s only the 5% that will be in the government hands.
Q: Why is 5% equity holder funding the business?
A: The Government is not funding the entire project. It’s just providing start-up capital in the form of a “Viability Gap Funding”. Once the strategic investor is in place, they will be expected to build on the initial investment made. This is as suggested in the OBC wherein it was mooted as a start-up approach to attract credible investors.
Q: Where is the funding coming from? The Budget or via Borrowing?
A: The funding is from the OBC. The$300m is the funding requirement for the next three years - 2018 ($55m), 2019 ($100m) and 2020 ($145m). The funds for 2020 will most likely be paid by the strategic investor. Kindly note the term funding requirement. It does not mean the exact amount to be expended. It may end up being lower than the $300m based on initial discussions and projections. As mentioned earlier, this will form part of the VGF. The Government can decide to fund it through budgetary allocation or development financial institutions like AFREXIM bank, AFBD, ISDB etc, which have indicated keen interests in funding this project.
Q: Are the aircrafts under lease agreement? If yes, for how many years?
A:: As you may be aware it’s almost impossible for you to pay and get a new aircraft immediately because it is not a shelf item. However, as part of our discussions with the major Manufacturers, we will pay the deposit for brand new aircraft and they will support us in getting very good lease aircraft coming directly from “C Check and certified by them”. By the time the new aircrafts are ready, they will be replacing these leased aircraft, till all the aircraft are owned by the airline. According to the manufacturers, the new aircrafts will start coming through from 2021.
Q: If it's a private investment led venture, why would a 5% equity holder determine the name, logo and other trademarks of the airline?
A: At the moment only the 5% equity holder is in place. The actions taken are in part-fulfillment of the requirements for an ATL and AOC. In any case, the Name and Logo can be amended it the owners feel it’s not right for the business. That said, since the new airline is going to represent our Nation, the Name, Logo and Color scheme should be in line with what was done.
Q: Is Nigeria Air same as Nigerian Airways? The staff of the latter are still waiting for their entitlements; approved by the President.
A: Well you can ask the owners of Air Nigeria, because what we have is *Nigeria Air* which is a totally different entity from *Air Nigeria and Nigerian Airways*. You can seek further clarification and confirmation from the CAC.
Q: Since it's private sector driven, why not adopt any of the existing airlines in Nigeria as the National carrier?
A: The existing airlines have their own business plans which do not conform with the OBC developed by the TA. Furthermore, to attract a good strategic investor, it’s best to start on a clean slate.
Q: Are there sinister motives?
A: Time shall tell but you may wish to note that airline businesses are operated to suit a particular environment. Nigeria is completely different from other comparable countries often referenced. The airline business is not a one-size fits all business. What we did was to identify our needs. Now we are trying to use our strength to get the opportunities that are out there in order to minimize our weaknesses and overcome our threats.
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