By Chinedu Eze
On Wednesday July 2018, the federal government of Nigeria, unveiled the name, logo and selected 81 routes for the much awaited national carrier. This was done by the Minister of State for Aviation, Senator Hadi Sirika at the Farnborough International Airshow in London and still assures that the project would be realised next year.
The federal government also plans to concession the major airport facilities before the end of next year. Chinedu Eze examines the prospects of the national airline operating under concessioned major airport terminals.
There is something nostalgic about national carrier in Nigeria. This is because the Nigeria Airways Limited, which was established on 23 August, 1958 and was liquidated in 2004 remains the most successful airline in Nigeria.
Under the defunct airline, Nigeria developed enviable manpower in aviation, attained the height of conducting C-check on certain aircraft types and developed the aviation infrastructure that is being rehabilitated and expanded after its demise.
So most aviators who are seasoned professionals benefitted directly and indirectly from the airline and the crops of professionals who are still manning the sector today are inexorably linked to the national carrier.
This is one of the reasons why the industry was aroused when the Minister of Aviation, Hadi Sirika in 2016 declared that one of the programmes of President Muhammadu Buhari administration was the berthing of a new national carrier. Not a few were expectant. Today, that expectation is beginning to fade, considering the responses of industry observers who spoke to THISDAY.
The Minister also said that before the end of the current administration, the four major airports terminals in Lagos, Abuja, Kano and Port Harcourt would be given out in concession to private investors in a public, private partnership arrangement. These are the two key programmes of the Buhari administration. Others are the establishment of a leasing company and the establishment of Maintenance, Repair and Overhaul (MRO) hangar. These projects are aimed to support the national carrier that was supposed to have taken off, at least by end of this year, if not for the economic devastation of the Coronavirus pandemic.
According to the International Air Transport Association (IATA), a national of flag carrier is an airline, which is subsidised or owned by the country in which they are registered. The airline often seeks preferential rights or privileges by the government for international operations.
In the past, the term national airline or national carrier was known to be airlines, which were owned by the government, and therefore associated with the national identity of the country. However, these days, it can refer to any airline with a strong connection to its home country, regardless of if it is government-owned. Therefore, not all flag carriers are owned by the government, as many have become private companies. Examples are British Airways, Air France, KLM, Lufthansa; but it has to be noted, however, that due to the devastating impact of Covid-19, some countries are injecting funds into the hitherto national airlines through equity holding in order to give then a lifeline. One example is Lufthansa.
IATA also noted that flag carriers hold a certain amount of significance in the aviation industry, in terms of both financially and symbolically. Previously, the airlines that were owned by the government were considered great for international trade and national defence. The global body rightly observed that some passengers would still opt to fly with their national flag carrier for the sense of pride that it gives them when they see the familiar tail of the aircraft on the runway.
Also, some passengers will sometimes choose to fly with flag carriers over other airlines, due to the image that they are safer and less likely to encounter financial difficulties. This is one of the reasons why many Nigerians still long for a national carrier and why they expect that the federal government fulfill its promise of establishing a nation carrier.
Sirika assured the realisation of the project while addressing state house correspondents after the weekly federal executive council meeting in Abuja recently and reiterated that the national carrier would be realised with huge stakes of the company owned by the private investors. In 2018, the Minister had unveiled the name and logo of the new national carrier, Nigeria Air, at the Farnborough International Airshow in London. The project was later suspended indefinitely
“I regret to announce that the Federal Executive Council has taken the tough decision to suspend the National Carrier Project in the interim. All commitments due will be honoured. We thank the public for the support as always,” he had tweeted.
But recently Sirika said the new national carrier was long overdue and the private sector-run airline would be in operation by early 2022, noting that the new national carrier was expected to be a viable airline and is potentially poised to cater to millions of travellers in Nigeria and Africa. Sirika said the COVID-19 pandemic forced the postponement of the planned date for the establishment of the national carrier initially planned for the end of 2021.
But many industry pundits are of the view that for a national carrier to be successful it ought to have the control of the major airport terminals in that country. In fact, successful airlines in Africa own or control the major airport terminals where they operate. Industry experts are of the view that if the terminals of major airports are given out in concession, the national carrier might not be given a head start. Besides, if a national carrier owns and earns revenue from the terminal of its operational hub, it would help the airline’s sustainability. This is because airports largely earn more revenues than airlines. So airline revenue would support an airline that owns it and helps it to become profitable.
Airlines generate revenues through aeronautical and non-aeronautical and the later is elastic because airports could be home to a range of revenue sources including special product areas (Duty-Free, Souvenir shops, bookstores and banks), food and beverage areas (restaurants, cafeterias), travel services (car rental, insurance services), personal service areas (showers, hairdressers, beauty centres but airlines generate revenue mainly from ticket sales and charter services.
Travel expert and organiser of Akwaaba African Travel Market, Ambassador Ikechi Uko told THISDAY that it might be difficult for the planned national carrier to be profitable if it does not have control of the terminals at its operational base. He cited examples with airlines that have control of the airport facilities, which revenues are at their behest and others that their airport facilities are managed by a different entity, which also control their revenues.
“Personally, I support the establishment of a national carrier, but I listened to a presentation from an official of African Airlines Association (AFRAA), which indicated that airports make more money than airlines and that airlines that make profits are those that control their airport facilities.
“Now, I wonder why Nigeria wants to have a national carrier and at the same time wants to concession major airport terminals. Kenya is at the verge of merging the Jomo Kenyata International Airport and Kenya Airways. Ethiopia Airlines, which is the most profitable airline in Africa, merged the airport facilities to the airline.
“So in that paper delivered by Aaron Monetsi of AFRAA, who was a guest speaker at Akwaaba African Travel Market, he noted that African airlines that do not have control and the revenues of their operations hub may not be able to be profitable. Emirates is in charge of its operational hub in Dubai, South Africa Airways (SAA) is floundering largely because its major airport facilities are managed independently. So the question is, which model is the Nigeria copying? How does it want to concession its airports and at the same time have a national carrier? This is where I have misgivings about the planned national carrier.
“Our model is different. I don’t know where it has survived in Africa. Airlines that survived in Africa worked with their airports. SAA failed because their airports are independent. Kenya Airways is merging with the airport because Kenya Airways generate about 60 per cent of the traffic and 83 per cent of the revenue of the Jomo Kenyata International Airport,” he said.
He also noted that in the last 10 years many airlines have collapsed in Africa, but no airport has collapsed during the given period. The national carrier must have to partner with the airport because that has been the most successful model so far,” he said.
The Chief Operating Officer of Ibom Air who is also former Managing Director of the Federal Airports Authority of Nigeria (FAAN), George Uriesi, told THISDAY that airlines could manage their operational terminals but not the airports. He noted that US mega carriers, Delta Air Lines, United Airlines have their terminals, adding that each airline can design its own terminals to suit its vision.
“But airport is expensive infrastructure, so no airline can go into it; if they do they will be stretched. Ethiopian Airlines has to design what it wants. But if the national carrier operates in airport terminals that are managed by concessionaire it may not affect its profitability. This is because the concessionaire will not charge itself out of the market. If the concessionaire introduces outrageous charges the airline can leave the airport and move over to others. There must be a balance in the pricing. Any airline that will have a terminal dedicated to it must have to be a big airline,” he said.
Speaking in the same vein, the industry consultant and CEO of Belujane Konsult, Chris Aligbe said the national carrier that would be floated by the federal government would be private sector driven and therefore should be given a level playing field with other airlines. In that case, no airport terminal will be dedicated to it but would utilise the same facilities as other carriers.
“As people talk about level playing field, the planned national carrier will not be publicly owned. It will be private sector driven. If the major airport terminals are concessioned, the operators should be willing to give the national carrier a position in the terminals. Except if such agreement are excluded, the national carrier can be given its own space. The airline and the concessionaire can agree on terms. But if you assign a terminal to the national carrier, there wont be equal playing field anymore.so the airlines should be given equal opportunities and should be left at the mercy of the concessionaires,” Aligbe said.
Many Nigerians are waiting and hoping that a national carrier will come before the end of this administration. But that hope is ebbing.
original article on This Day.