The national carrier question: The intangibles

 

The national carrier debate gets hotter. Can government pull this through? There are intangible benefits of setting up one for Nigeria, WOLE SHADARE writes

The debate

The debate for national carrier for Nigeria will never go away depending on the side or position one takes.  It is a position of naysayers and optimists. It is the most contentious debate that no one will ever win until the Federal Government matches its words with action.

Each time the discussion on the topic pos up, friends tear each other up on the need or otherwise of the project that the Minister of Aviation, Hadi Sirika, is currently working on.The recent face-off is the one involving two respected aviators, Mr. Chris Aligbe and Mr. Simon Tumba, both aviation media consultants.

Face-off

The Asset Management Corporation of Nigeria’s (AMCON) Chief Executive Officer, Ahmed Kuru, recently proposed the adoption of Arik Air as the new national carrier. Kuru said the airline had sufficient asset to kick-start a new national carrier, instead of a fresh start being mid-wife by the minister of aviation. He said that the merger would be a better stepping stone rather than setting up a brand new airline from the scratch.

According to him, this will cost the Federal Government fortune, especially in face of the nation’s tight budget. In a swift reaction, Sirika fired back, saying that the airline did not meet the requirements of a national carrier.

Sirika explained that any airline that will operate at that level must be such that would support the national economy with $450 million GDP for 200million people, and must be equipped to compete favourably.

He said: “The international airlines that have dominated Africa, 80 per cent of those airlines are non-African. In view of the AU Agenda 2063, the Single African Aviation Market, we thought that there will be an airline that will take up that challenge; that will take advantage of it and be able to provide services to our people.

Immediately after Sirika’s dismissal of Kuru’s suggestion of merging the two airlines to raise a new national airline which technically belongs to the Federal Government, Aligbe fired the first salvo, saying Kuru’s suggestion was misleading because a national carrier should be a brand new one, which had been on the works for the last four years.

He said the two airlines were fraught with many intractable challenges that will make the product a disaster ab initio.

Aligbe said: “Can any healthy and virile establishment be founded on the back of unhealthy and struggling entities? Will any sensible investor invest in such establishment?

 

“Where no investors come, such a national carrier will exist on 100 per cent government equity, just like the liquidated Nigeria Airways.

Few weeks after, Tumba took a swipe at Aligbe and defended robustly Kuru’s position on how to easily go about floating of a national airline, which has been on the table for nearly five years.

Tumba said: “My friend and senior colleague, Chris Aligbe, wrote an article last November condemning the suggestion by the Managing Director of Asset Management Corporation (AMCON), Ahmed Kuru, calling for the merger of Aero Contractors and Arik Air to form a national carrier. Sirika without doubt quickly pushed down that proposal, insisting only a new carrier will work.

“The argument of Sirika and his supporters in setting up a national carrier is indeed baffling. A UK-based respected Nigerian aviation expert, Nick Fadugba, said in 2018 it was only Nigeria that owns two national airlines and is struggling to set up a third one.”

He further stated that the argument by Chris that Arik and Aero were not government owned because it is under Receivership by AMCON is surprising.

He further stated that gleaning through past reports, Sirika is working to get private participation to set up the national airline, although nearly N50 billion ($140 million) was budgeted for that purpose in 2019.

The discussion has led to stakeholders examining what led to the collapse of Nigeria Airways (the defunct national carrier), as well as the pros and cons of creating a new national carrier.

 

 

Benefits

While the naysayers may have a point on why Nigeria should not float a national carrier, there are still sound reasons why Nigeria should float one. Most of the reasons canvassed against its creation are rooted in the failures of defunct Nigeria Airways.

Nigeria Airways was liquidated in 2003 for many reasons, including mismanagement, corruption, and spate of plane crashes from the 80s.

Since the disappearance of the national carrier from the aviation space, Nigeria has suffered a loss of around $2 billion in capital flight.

Despite this, those against the creation of a new national carrier believe that it is not a logical step for the aviation industry in Nigeria.

They propose an alternative, which is opening up Nigeria’s airspace for more direct and frequent flights to and from African cities. They say this has the potential to boost the economy by $128 million and create over 17,000 jobs.

The loss of $2 billion in capital flight is further exacerbated by the domination of the Nigerian aviation space by foreign airlines and the weakness of local insurance companies to effectively handle issues of aviation insurance. If the proposed alternative is adopted; this capital flight could double, as this will lead to more foreign participation in the sector.

Capital flight blockage

Also, the establishment of a national airline will encourage the establishment of maintenance, repair and overhaul (MRO) facilities in Nigeria, which can help block further capital flight and inevitably create jobs. Nigeria’s MRO facilities disappeared with the country’s national carrier, along with the $190 million that came with the facilities.

The third problem of not having a national carrier is the under-utilisation of the Bilateral Air Service Agreements (BASA) that the government has signed. These agreements allow international commercial air transport between territories.

Nigeria has signed 78 of these, but they favour other countries, partly due to the lack of national carrier in Nigeria to reciprocate.

A national carrier will make it possible for more players to fly competitive routes, which in turn will reduce the exorbitant airfares in Nigeria’s aviation sector.

Reaping of Forex

Floating a national carrier is also a useful way for government to earn foreign exchange. This can be done by privatizing a majority stake in the airline. This helped the national carriers of Ethiopia and Singapore to thrive.

There are also examples of national airlines being vital in boosting tourism. Kenya doubled the growth of its tourism industry through Kenya Airways by promoting its tourism sector on all flights on the national carrier.

A new national carrier will also result in an increase in jobs and development. Job opportunities for positions such as engineers; pilots; flight attendants; cleaners; booking agents; and caterers; will be created. It will also help to train Nigerians for the jobs created in the sector. This is important when most pilots and engineers in the industry are foreigners.

The new project can kick start the renovation and activation of the over 26 airport facilities in Nigeria.

Last line

The ripple effect of this is an increase in air travelers, which leads to a decrease in road travelers and a significant reduction in road accidents in Nigeria. There are very few national projects with this potential. Nigeria should do everything within its power to make it succeed.

 

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