How ineptitude fortified case for airport privatisation

The disclosure by the Federal Government to privatise some of the country’s aerodromes could have been helped by its disappointment over growing concern of the state of Nigerian airports and the need for private sector involvement in the management of the aerodromes for better service delivery, improved revenue generation, and increased contribution to the nation’s gross domestic product (GDP).

The worldwide trend to privatise airports led the Congress to direct the United States’ Federal Aviation Administration (FAA) to experiment with privatisation.

Because there always will be a public interest in the operation of major commercial airports, that are both vital assets to the community and potential monopolies, it is generally impractical to transform airports into wholly private businesses.

Most privatisation projects involve substantial regulation of the private investors, detailing the design of their services, the prices they may charge and their openness to users.

The privatisation trend has definitely affected airports. Major privatisations of airports have occurred since the 1980s across the world, the most notable being in Australia, Britain and Canada. Other significant privatisation efforts have occurred or are in process in Argentina, Austria, Bolivia, Chile, Hungary, Italy, Macao, Mexico, The Netherlands, Philippines, South Africa etc- the list keeps expanding.

Although, the Federal Airports Authority of Nigeria (FAAN) could be said to have tried its best in putting some of the airports running up till now, the Federal Government is still not convinced that the authority has the wherewithal to turn around the fortunes of the facilities.

Managing Director of FAAN, Saleh Dunoma, at the just concluded IATA Day Aviation in Abuja, said the government’s policy on it would be executed to make the airports more efficiently run.

Participants at the summit lauded the initiative, saying it would help the sector to improve in terms of service delivery. A former Director-General of the Nigeria Civil Aviation Authority (NCAA), Dr. Harold Demuren, lauded the idea, saying it is the best way to go.

He stated that despite the hiccups with the first case of Public Private Partnership (PPP) in the country, which gave birth to MMA2 terminal, the benefits cannot be quantified. Managing Director of Nigeria’s biggest airline by fleet size and operations, Arik Air, Chris Ndulue, who lamented the high taxes and charges at most of the aerodromes in the face of parlous service delivery, also backed the move.

His words: “Nobody is happy with the charges and taxes at our airports without commensurate service delivery. We have talked about PPP. The issue of Bi-Courtney Aviation Services Limited has not been fully resolved, but I pray it is resolved quickly.”

A former Minister of Aviation, Stella Oduah, could, at least, be credited with the idea of airport remodelling. She tried to reposition the sector through her ambitious airport remodelling and Aerotrpolis projects, which were badly executed and cost tax payers so much.

A few years after her departure, the airports are still not run efficiently and effectively, forcing the new administration to seek the best way out. Most of the terminals – especially the Lagos International airport are old and have outlived their usefulness.

The only option left is to bring them down for a state of the earth facilities. The airport authority is saddled with too much task that it may not be able to focus on providing the required services, and at the same time run the terminals profitably.

Piqued by the state of most of airport terminals, former Aviation Minister, Osita Chidoka ranked MMA2 the best run terminal in Nigeria. He disclosed this during one of his visits to inspect facilities at the MMA2.

He was particularly impressed with the new self-in kiosks, pilots/crew briefing rooms, the general ambience of the terminal and its efficient service delivery. Currently, only the Murtala Muhammed Airport Terminal Two (MMA2), Lagos, is being run by the private firm of Bi-Courtney Aviation Services Limited. Other airport terminals are owned and operated by the Federal Government through FAAN.

About eight of the airport terminals are built and run by state governments.

The states are: Akwa-Ibom, Delta, Bauchi, Katsina, Gombe, Taraba, Jigawa, and Kebbi. The International Air Transport Association (IATA), the International Civil Aviation Organisation (ICAO) and Airports Council International (ACI) at different fora during their visits described the facilities in the terminal as world class.

They were particularly impressed with the seamless facilitation processes and the cleanliness of the terminal. But the management of these state-owned airport terminals has come under public scrutiny.

Not a few experts and stakeholders insist that the running of the terminals by government, federal or state, has left sour taste in the mouth of airport users most of who enjoy everything but cost-effective and efficient service delivery.

The thinking is that going by global trends, state management of airport terminals is no longer the fad; many countries across the globe have either embraced concession or privatisation.

With regards to resuscitating the airports, experts recommend two radical solutions, especially for airports with a minimum annual traffic of five million passengers. The first is full privatisation while the second is leasing (concession).

The Conservative Government in Britain adopted the first model in 1987 by privatising the British Airports Authority, raking in $2.3 billion from the sale. In 2009, Heathrow and Stansted generated combined revenue of $4.27 billion. The other workable model, which the government could consider, is a partial privatisation or leasing.

Examples here include the Charles de Gaulle Airport, Paris, France, and Frankfurt, Germany. While the airport in France generated $3.66 billion in 2009, the one in Germany receipted $2.74 billion. The Madrid Airport, Spain, which is in the process of privatisation, raked in $4.16 billion the same year.

As a result of the move to make airports viable, the Centre for Aviation, an Australian consultancy, estimates that there are currently “450 airports globally with some form of private-sector participation either in management or ownership.”

Even Russia is jettisoning the state-run model, going by its 2014-2016 privatisation plan, which aims to cede operations at Moscow’s Sheremetyeva and Vnukovo airports completely to the private sector.

Around the world, privatisation has proven to be an efficient way of managing infrastructure assets, and transparent privatisation can liberate the government from appropriating money annually for airport operations.

The nation’s seaports privatised in 2006 have shown practical instances of how privatisation can help save economic infrastructure and sectors from decay.

Aviation consultant, Chris Aligbe, who spoke in an interview recently on the state of Nigeria’s aviation, said the federal government must take a holistic look at the industry, in all ramifications, not just the airports.

“None of our airports is world class, not even the Murtala Mohammed International Airport (MMIA), even with the terminals that the Chinese are helping to build; those are tolls, small terminals. They may not put us where we should be.

If we want to be where we should be, we should immediately, in the next one or two years, concession our airports in order to develop the airports. The MMA2 managed by Bi-Courtney is the only airport worthy of mention in Nigeria,” he said.

Critics, however, argued that privatisation often creates local monopolies, especially in utilities, who often exploit their market power to harm consumer welfare by reducing output and raising prices or profits. They also point to other market failures associated with privatisation such as public good, negative externalities, and imperfect information.

It is also claimed that, in many nations (and especially developing), divested assets are acquired by foreigners, who funnel bulk of their profits outside the country without making any significant local investments, socially and economically in effect, adding no real benefits to the economy.

Most of the airports such as the Changi International Airport, Singapore, have, in the past two decades, been rated as the best in the world. Private sector and not governments of those countries manage these airports.

Experts are of the view that airports should be placed in the hands of private investors, saying it is a way of curtailing corruption to fast-track development in the industry.

To them, private investors should run the facilities in order to rake in more revenue, rather than leaving everything to collapse in the hands of the government officials, to the detriment of the entire economy.