IATA to monitor modalities for Nigeria’s airports concession

…fears high charges by investors

The International Air Transport Association (IATA) has said it would follow up on Nigeria’s plan to privatize some of her airports to know the modalities it plans to adopt so that airlines would not be at the mercy of the new investors.
IATA’s Regional Vice- President, Africa and Middle East, Mohammed Ali Albakri, told Woleshadarenews on the side-lines of the Association’s 75th Annual General Meeting (AGM) and World Air Transport Summit (WATS), which just ended in Seoul, South Korea.

He noted that the Nigerian government suspended the airports privatisation project shortly before the just-concluded elections, stressing that they would follow up whenever government was ready to privatise the aerodromes.

Albakri stated that their concern over concession stems from what IATA had seen in the past with unjustified concession length, selection based on highest bidder, limited stakeholders’ engagement, overly prescriptive construction plans, overly prescriptive charges and higher risks for airline and consumers.

IATA has never been a fan of airport privatisation or concession across the globe because of what it described as fear of increase in airport charges by investors without appreciable investments in the facilities.

Besides, it noted that in most cases, the airlines bear the brunt while costs are passed to passengers, a situation he said leads to increase in air fares.

“Due to recent elections in Nigeria, the Federal Airports Authority of Nigeria (FAAN) and government have stopped the airport privatisation programme. IATA will follow up on the issue once the new ministers and cabinet are appointed,” Albakri said.

“There is no one-size-fits-all solution. A broad range of ownership operating models exist that can meet a government’s strategic objectives without a transfer of control or ownership to the private sector. Globally, many of the most successful airports are operated as corporatised entities of governments.”

Also, Senior Vice President, Airport Passenger, Cargo, Security, Nick Careen, stated that the generally accepted perceptions of introducing privatisation have not held true in the airport sector.
His words: “Charges are higher for privatised airports – this is not what we should accept from privatisation in any sector. Airline customers or governments would not accept it if airline fares increased during privatisation.”
Careen equally noted that operating efficiencies are not much better for privatised airports contrary to the expectation of introducing private sector practices.

He stated that even though efficiency is not better, “profits are significantly higher. Clearly airport privatisation comes at a price – a price, which we and customers have to pay.”

He highlighted that primarily, a major shortfall had been that government focused on short term financial gains from the airport sale or concession, hinting that often it is simply the highest financial bidder that is selected for the privatisation without the necessary focus on the quality of services to be provided.

“We also find that there are inadequate economic regulatory safeguards in place to project airlines and consumers,” he said. “There is a lack of overall consultation with users, during the privatisation process on the intended expectations and outcomes.”

Nigeria and indeed Africa are in an infrastructure crisis. Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. Many feel it is wrong to assume that the private sector has all the answers.
Airlines operators said they have not yet experienced an airport privatisation that has fully lived up to its promised benefits over the long term, as airports are considered critical infrastructure.
The Federal Government through Hadi Sirika who held sway as Minister of State for Aviation pursued airports’ privatisation and maintained that government would go ahead to complete the process.

Transaction advisers were initially appointed from January 2017 and Sirika also intimated that government planned ultimately to offer all state owned airports to investors.

At the time the government stressed that the concessions were not a sale of the airports, only management rights, which did not appear to go hand-in-hand with the requirement to be able “to finance and construct large airports.”

A swathe of Nigerian trades unions have consistently opposed the privatisation procedure and continue to do so. Their position is that it would take several years to deal with all the issues, particularly that of job losses.

Wole Shadare