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Airports Concession: Varying Sides Of The Prism

Airports Concession: Varying Sides Of The PrismBy Kenneth Jukpor & Nkem Osuagwu

Several weeks after the Federal Government gave the go ahead to concession four of the nation’s major airports specifically, Murtala Muhammed International Airport, Lagos; Nnamdi Azikiwe Airport, Abuja; Amino Kano Airport, Kano; and the Port Harcourt Airport, industry stakeholders still remain in the dark as to the parts of the airports that are open for concession. This is because the ministry of aviation is yet to come up with the framework that will facilitate a successful implementation of the programme.

So far, stakeholders insist that they are in the dark as to what the areas that still remain to be concessioned even as they have tasked the Aviation Minister, Senator Hadi Sikira to make the process transparent by making open the framework for the concession so that interested private sector individuals and companies could key into the programme.

Analysts within the industry have raised certain issues like the issue of post concession economic crisis as a result of the absence of an economic regulator for the concessionaires, others have lampooned the massive unemployment that would follow the concession while another school of thought believes that the airport concession would give birth to robust competition, variety and commensurate fares similar to the telecommunications sector after privatization.

On the issue of massive lay off, Hadi Sirika had assured repeatedly that no aviation worker would be sacked. However, it remains a puzzle as to how the former pilot intends to generate revenue to pay these workers. Industry watchers have described this statement as unfounded and unrealistic noting that the ideal question should be how many workers would be sacked and not a fallacious promise that none would be sacked. This situation has already led to massive lobbying as aviation employees across various agencies are jostling to retain their jobs. The Minister may also work out modalities to ensure that some of the workers are absorbed into the private companies, although the fate of this decision would rest mainly on the concessionaires. FAAN has staff strength over 6,000 workers – how would the agency get money to pay their salaries and entitlements when most of them would be redundant as soon as the airports are concessioned? Observers have asked.

There is also a mystery as the public hasn’t been told how much the facilities to be concessioned generates for the country in order to compare, critic and analyze the veracity of the $3billion annual returns that the post concession exercise would bring. An insight into the aspects of the airport that will be concessioned would enable the public realize how much would come into the coffers of the Federal Airports Authority of Nigeria (FAAN). How much is FAAN making currently and how much increase or deficit would the concession bring vis-à-vis the efficiency? The issue of the availability or lack of an economic regulator to ensure that the concessionaires do not thrive under private monopoly that would lead flight fares to skyrocket in the near future.

The government has insisted that there is no going back on its plan to concession these major airports; Lagos, Abuja, Port Harcourt, and Kano, a venture which they have argued would bring about infrastructure upgrade as well as see the airports becoming cash cows for the industry when it is implemented.

During an exclusive chat with MMS Plus, a training consultant at the Chartered Institute of Logistics & Transport (CILT) Rivers State Chapter, who pleaded anonymity, questioned the rationale behind concessioning the nation’s most functional ports.

According to him, the benefits of concession should have been strategic to get other less functional ports become more efficient.

“I support the airports concession however; I think the concession should begin with airports that are not really performing optimally at the moment, Ibadan, Calabar and Port Harcourt airports ought to be concessioned before Abuja and Lagos airports.”

On the issue of port economic regulator, he said, “Well, there is a system to checkmate the economic activities. The problem has always been the right professionals to get the right. The process should be void of political interference. I don’t think there would be any vacuum with regards the regulation of economic activities of the airport concessionaires because we have all the agencies still operating at the port.”

“We have NCAA for customer related issues; we have FAAN, NAFDAC, etc. For the seaports concession we had the Nigerian Ports Authority (NPA), which is still the landlord of the port, but there was a vacuum which led the Federal Government to appoint the Shippers’ Council as the port economic regulator especially as terminal operators and shipping lines seized the opportunity to inflate their charges whilst introducing new arbitrary charges. However, in the aviation industry I see a replication of the telecommunication sector just like MTN, GLO, AIRTEL, 9Mobile  in the sector, if the sector is competitive enough, the fares will be determined by the market forces. Airports concession would bring about quality of service and customer satisfaction.” He argued.

Meanwhile, the Chief Executive Officer of Kings Communication Limited and Publisher of MMS Plus newspapers, Mr. Kingsley Anaroke expressed fears that the aviation industry may face an economic crisis reminiscence of the shipping sector as a result of the absence of an economic regulator.

“It is strange that the Minister of Aviation abandoned the National Policy on Aviation developed in 2013. This Policy called for the establishment of an economic regulator which should come before the concession. The concession of the seaports in 2006 without an economic regulator coupled with the absence of antitrust laws in the sector led terminal operators and shipping lines to increase their charges arbitrarily and introduce several frivolous charges. These problems led to a presidential directive by former President Goodluck Jonathan for the Nigerian Shippers’ Council (NSC) to become the port economic regulator, a development that has attracted several court cases by terminal operators and shipping lines.”

The veteran journalist posited that in countries like USA, UK, South Africa and India, an independent Economic Regulatory Unit with a Single Till System has been introduced as a way of improving the efficiency of operations and investment whilst reducing losses from the anticipated economic benefits.

“The National Policy had stated that in order to minimize the potential misuse of market power by aviation service providers and to foster a competitive, efficient and fair commercial environment where passengers receive quality services at reasonable prices, the Federal Government will establish an autonomous Economic Regulatory Unit under the office of the Honourable Minister that will become an Agency with time” Mr. Kingsley argued.

He also added that the patronage of telecommunications services differs from that of aviation which means it would be ideal to compare how both industries react to privatization.

Recall that Sirika making a case for the concession of airports said the government could no longer sustain the funding of the 22 airports across the country and had to enter into concession arrangement.

The Aviation Minister had stressed that the Murtala Muhammed International Airport in Lagos, was originally built to handle 200,000 travellers per annum but now, handles about eight million passengers annually, adding that the government did not have the resources to upgrade the facilities to handle the increasing number of travelers, even as it is believed the government would millions of dollars from the process.

There is no doubt that such a venture when it is implemented transparently has a lot of advantages. However, a look at some of concession ventures so far undertaken in the aviation industry failed woefully in generating the projected revenue instead they have been subject to litigations because they were hurriedly done, without taking cognizance of their benefit to the Nigerian people.

For instance, the concession of the Murtala Muhammed Airport Two (MMA2) to BI-Courtney Aviation Services Limited (BASL, is cash study. Though the arrangement was able to deliver an improved terminal building for domestic operations, indeed the best in the country with added modern facilities, it has not yielded in terms of funding to FAAN. Even, as it had remained an issue of litigation, with a greater portion of the arrangement – the hotel and conference centre yet to be executed several years after the concession agreement was signed. Also, the detail of the arrangement still remains a mystery to most industry watchers.

Also, some other companies which tried to enter into such arrangements with FAAN had bad tales to tell. These include AIC owned by Chief Harry Akande, for the construction of hotel chains at the airport remains an issue of litigation, and Marvis limited which had an arrangement to upgrade facilities at the airports an arrangement that later became an issue of litigation among others.

This is not to say all have failed. Last week, FAAN in partnership with Seymour Aviation Ltd inaugurated a multi-storey car park with a capacity for about 1, 300 cars at the Murtala Muhammed International Airport (MMIA), Lagos. The six-storey facility, built through a Public Private Partnership (PPP) was financed by Fidelity Bank Plc and would be for a 30-year tenor.

Former Director General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, speaking at a recent event on “The Gains of Airport Privatization and Concessions in a Dwindling Economy Such as Nigeria”, said he supported concession, but warned on the need for government to “review all existing issues and litigations which arose from previous concessions before getting into another concession agreement with new investors.”

He referred to the issues which arose from the concession agreement between the Federal Government and BASL, saying government’s failure to resolve this had led to unending litigations. He advised that this must be resolved first before government can contemplate another concession; and advocated for good corporate governance, transparency and reduction of government interference in the activities of the aviation agencies.

Aviation Consultant, Chief Executive Officer, Belujane Concept, Mr. Chris Aligbe, stressed the importance of concessioning the airports, noting that the concession should follow strict legal and legislative framework to avoid the kind of controversy being witnessed in the case of Bicourtney Aviation Services Ltd.

“Before you concession, there must be legal framework, there must be legislative framework. It must go through the National Assembly and have fundamental law that would guide the concessioning,” he said.

Meanwhile, Engineer Sheri Kyria, former President, National Association of Aircraft/ Pilots and Engineers (NAAPE) said the concession might result in high air fares as the concessionaire in the bid to make profit and recoup his investments faster might charge airlines higher for services rendered which will be passed on to the travelling public in form of higher Airfares. He said though NCAA has power to regulate pricing in the sector, its attempts to call the concessionaire to order in this regard might not yield the required result because the concessionaire might go directly to the government in such issues and not listen to NCAA because there is no legal framework to back up such issues yet.

Though Sirika had reasoned that the earlier attempts at concession of some government assets failed because those driving the process were not knowledgeable of what concession entails; “but today, we have the knowledge and it will be transparently done with the active participation of workers in both the delivery and the steering committees to drive this process” he said.

As the concession of the airports edges closer aviation stakeholders and the nation at large watch keenly as an impending istoric event which could make or mar aviation in the nation is set to happen.

 

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