When the news filled the air some two years ago about the launch of a flag carrier by Nigeria at Farnborough Air-show in London, United Kingdom, it met mixed reactions from various aviation experts in the country.
With the sudden coming of COVID-19 and the many woes it has left in its wake, in terms of lost lives, collapsed businesses and battered economies – especially with aviation being one of the biggest casualties, this might be a good time to kiss the dream of a national carrier goodbye – at least for now.
Here’s an interesting editorial culled from The Guardian Nigeria.
The proposed airline that was christened ‘Nigeria Air’ had good intentions on its trail. But good intent was not good enough to convince Nigerians or enable the airline to fly in fairly good time. It is interesting to read the other day that the COVID-19 lean era has readily foreclosed such a high-risk venture. Alas, good logic should prevail on advocates to bid the project a good farewell.
In fairness to the Federal Government and Nigeria Air promoters, a national airline is indeed an elegant asset and a nation’s pride. In the heydays of defunct Nigeria Airways, the 1980s and 1990s, Nigerian middle-class could tell that the airline was an embassy in motion, showcasing the splendour of our political and economic strength to the world. That was before gross inefficiency teamed up with official mismanagement and corruption to ruin the airline and liquidated its assets to pay off debts in 2004. Its unfortunate demise has left a yawning vacuum that has never been filled, and a rationale to start a new carrier.
Today, there are about 100 Bilateral Air Service Agreements (BASAs) racked up by Nigeria. It means 100 potential international markets for a national carrier to operate commercially and unhindered by aggressive aero politics that often clips the wings of designated flag carriers. At this time of COVID-19, a national carrier would have been the most useful vehicle to repatriate our citizens who are stranded worldwide.
But as patronising as the asset is, the logic of its economies is flawed. Airline business is highly capital intensive and too expensive a bill for national pride alone.
That explains why economic superpowers like the U.S., the UK, France, among others, have for long shared the burden of ownership with the private sector. Even the most successful airline in Africa – Ethiopian Airlines – is aiming to divest both asset and liability to enhance its chances of survival. Apparently, with that in mind, the Outline Business Case of the proposed Nigeria Air has a joint partnership between the state and private sector, with the latter bearing as much as 95 per cent of ownership.
However, credible investors are scarce in high-risk modern aviation. Attracting them has been a major hurdle for project handlers in the Ministry of Aviation. While the potential of the aviation market is not in doubt, the government too has not shown to be credible or able to honour agreements. The debacle of failed Virgin Nigeria airline, and yet unresolved legal battle between Bi-Courtney Aviation Services Limited (BASL) and Federal Airports Authority of Nigeria (FAAN), over Murtala Muhammed Airport terminal II (MMA2), are credibility dark clouds hanging over the Federal Government and sufficient reasons not to be trusted with new partnership ventures.
If it was difficult attracting credible allies then, seeking them in economies plagued by COVID-19 realities must be an arduous task of squeezing water out of stones. Today, all airlines, including the government subsidised legacy carriers, are struggling with million-dollar debts and heavily dependent on government bailouts not to go under.
For instance, Delta Airlines earlier estimated the loss of $534 million for Q1 2020. Ethiopian Airways, the biggest on the continent, flagged the loss of $550 million in April. Others, like British Airways, Emirates, and Lufthansa are caught in-between reducing the fleet-size and massive furlough of the workforce. The pandemic has cost global aviation $314 billion revenue loss, according to the International Air Transport Association’s (IATA) estimates. It is, therefore, not a good time to bank on beleaguered foreign investors.
The timing is unfair to the Nigerian economy, nor should it have a room for white elephants. The oil receipt, the mainstay of the economy, has plunged, forcing the government to readjust the 2020 budget. The desperation was so awkward that the National Assembly had to approve a 42 per cent obnoxious cut in primary healthcare and 54 per cent in the basic education budget, at a time of medical health emergency. Besides, there is a 50 per cent cut plan in revenue from privatisation, cut in capital expenditure by 20 per cent across all ministries, departments and agencies (MDAs), 25 per cent cut in all government expenditures and a suspension in recruitments. One cannot but wonder how a new national carrier project could still be a reasonable proposal within this equation.
The job already was done on project development notwithstanding, the harsh realities are quite overwhelming. However, saying ‘‘thank you, goodbye’’ should not be so difficult for a project that is no longer feasible or temporarily unviable. After all, Thomas Cook, the iconic brand in travel and tourism, collapsed overnight after 178 years of operations.
It needed a $250 million bailout, which the UK government would not bankroll. On the day it folded up, last September, it had over 600,000 passengers waiting across the world. Sentiment didn’t save Thomas Cook. The South African government also had to say goodbye to South African Airlines (SAA), its national carrier, over $1.4 billion accumulated debt to the government. President Hage Geingob of Namibia has also told the parliament that Air Namibia might be liquidated over a series of losses that have never yielded to bailouts. All of them, among others, could tell that it is not the best time for the government to float or fund a new airline.
The Ministry of Aviation and its handlers should, therefore, tow the path of wisdom and shift priority to the health of the industry rather than embark on profligacy that may not last beyond Buhari administration. In situ, the aviation business environment in Nigeria today is too toxic for any airline to survive for long, and the same fate awaits the national carrier in a fair competition.
With the airlines remitting a total of 34 taxes and charges, spending 30 per cent of revenue on imported aviation fuel and another 40 per cent on overseas maintenance, it is not difficult to see why Nigerian airlines have an average of five-year life expectancy. Ideally, the government should focus more on a business-friendly environment for all-comers to thrive, rather than lead the charge of another white elephant in very trying times and difficult terrain.
Lest we forget, the national carrier plan is just an arm of the Federal Government’s 2016 master plan for the transformation of the aviation industry. There are other critical components like the plan to unbundle the Federal Airports Authority of Nigeria (FAAN) and concession the airports to enable them to run efficiently and profitably. Others are an aircraft leasing company, creation of aero-tropolis, and Maintenance Repair and Overhaul (MRO) facility to support the industry. Technically, these are the low hanging fruits and the groundwork toward a sustainable national carrier and prosperous industry. For strange reasons, none of these has materialised until the present.
If anything at all, this is the time the air travel industry needs the government’s intervention. Not to open a new vista but to keep the existing ones from dying. The incursion of coronavirus pandemic is catastrophic, shattering the glass ceiling of the global economy with aviation the worst-hit.
After three months of lockdown, local industry losses had been estimated to reach N180 billion. Over 40,000 travel agents have lost jobs, with 200,000 direct and indirect jobs at risk. This is the time for the government to give the palliatives it promised to ensure that the industry gets stable and survives. A new national carrier distraction, with all its merits, can hardly be a substitute for an industry in distress or a government in fiscal and credibility mess.