FG Hasn’t Itemized Airport Services To Be Concessioned – Ojikutu

By Kenneth Jukpor
FG Hasn't Itemized Airport Services To Be Concessioned - Ojikutu
Ojikutu
 
Group Captain John Ojikutu (Rtd) is a former Commandant of the Murtala Muhammed Airport, Lagos. He also is the Secretary General of the Aviation Safety Round Table Initiative and Chief Executive Officer, Centurion Securities. In this exclusive interview with MMS Plus newspaper, Ojikutu speaks on several pertinent aviation sector issues. Excerpts:
As  Nigerian airports tilt towards airport concession, experts have stressed the need for the federal government to be wary of investing scarce resources on the projects that are set to be concessioned. What’s you take on this situation?
From the experience I’ve had about management of government intervention for airport infrastructure in that were deficient, I’ll give my position. Several years ago, between 2005 and 2007 aviation stakeholders lamented that the sector’s crisis which led to plane crashes were results of poor infrastructure. I was a member of a committee set-up to look into the Ministerial recommendation and implementation of some interventions. The first thing that government did was to give out N19.5billion to the six aviation agencies, including NCAA. Unfortunately, that money was mismanaged. The Federal Executive Council (FEC) initially approved that the money be collected from the Central Bank of Nigeria (CBN) at 2% interest.
However, the politicians during the period were so much in a hurry that they couldn’t wait for the National Assembly’s approval. They went to the commercial banks to get that money at 25% interest.
These are some of the historical events that make me not to approve of any moves for concession, loans or federal government funding on airport infrastructure. If we really wanted to concession the airports, we should have achieved it several years ago.
Let me tell you an interesting gist. Two banks, UBA and Zenith bank fought over that transaction because one of the UBA bank chiefs was a member of the committee but when the money was collected, it was done through Zenith bank which wasn’t there agreement. It took the intervention of the president who decided that the money be shared between both banks. They shared that money and they took their 25% interest immediately.
It took the intervention of the President, Olusegun Obasanjo to solve the Fracas between but banks as he said the money should be shared into two parts and both banks benefitted.
When people say that most of the things that happen in this country is hardly in the interest of the entire citizens but a select few who are close to those in government, you see that most times this assertion is correct. These banks didn’t just collect a whopping 25% interest on that fund, they settled themselves with the interest before releasing the rest. The entire 19.5billion wasn’t sufficient in the first place because there was a lot to do with funds in the airports. They had to get safe tower, Falcon radar and other equipment but the sum approved was a paltry N19.5billion and banks took their interest first.
It’s also more disheartening when one considers that the bulk of the monies in Nigerian commercial banks are government funds. Why should government borrow from private commercial banks when the CBN exists?
In 2012, a similar situation occurred when private airlines were in a dire need of money. They needed about N200billion and they went to borrow at 5% interest from CBN. So, private operators could access CBN to get loans at 5% interest but the government would borrow from private banks for a national project at 25%. Isn’t this an irony?
Given these historical accounts of government interventions and borrowing for the aviation sector, what advice do you have on aviation sector financing? In September, federal government approved over N86billion for the Ministry of Works and rehabilitation of airports in Lagos, Abuja and Kano. We are also talking about concessioning the airports, so how do we balance this?
 
In the last three months, I have become concerned about the expenditure in the aviation sector and across the nation generally. The emphasis seems to be how to spend money and where to get money with the polity heating up ahead of the next presidential election.
The airports that government approved this money for are the same airports that are scheduled for concession. What are these monies meant for? Are they for aeronautical or non-aeronautical services? These are questions that are yet to be answered. The industry has to know what aspects are up for concession and it is important that we don’t concession aeronautical services.
If we must concession, we shouldn’t consider the aeronautical services but we can concession the non-aeronautical services.
Runways, runway lighting, taxi-ways are key areas that shouldn’t be concessioned. We shouldn’t have a situation where the International Civil Aviation Organization (ICAO) which has placed us on Category 1 status would downgrade the nation.
They can concession the airport terminal building and extend the building to the apron; car parks, toll gates, and other auxiliary services can be concessioned. Passenger Service Charge (PSC) isn’t aeronautical, so this could be up for concession. However, landing and parking shouldn’t be concessioned because it’s aeronautical. If the area is concessioned, the concessionaire can collect fees for parking, but landing is an aeronautical service. These are issues that have to be addressed before the airports are concessioned. We must define what services at the airports will be concessioned and what wouldn’t be concessioned.
Aviation workers’ union have lamented that FAAN would be setback to the tune of $1billion if total airport concession is done at the airports. How realistic is this?
I expect that the government knows the value of these airports at the moment. It’s like someone who wants to lease his or her property to a tenet; you’ll be the to dictate the fares because you’d know the value. I’ve done the stats for MMA alone can generate a minimum of N150billion every year. When you do the stats for the four airports, concession is a good thing if managed rightly.
However, airport concession would see a lot of inefficiencies removed at the airport. You’ll be amazed if you spend a day to observe the traffic at MMA.
Overseas, no one would charge less than $5 for Passenger Service Charge. When people say the cost of aviation charges is much I ask them to compare to other nations. They should also calculate the cost of aircrafts, its maintenance, cost of aviation fuel, among other issues. International airlines don’t complain about aviation fuel because they buy it cheaper in Nigeria. In America, jet fuel is $4 per gallon which equates to about $1 per litre, but in Nigeria it’s N250. America manufactures the fuel yet they buy it at $1 over there; we import the same fuel and subsidize it so it’s available at N250 per litre. Foreign airlines will still prefer to buy from Nigeria if we sell at N300 per litre because it’s cheaper.
I served at the MMA between 1990 and 1994. I recall when air ticket was about N3,800 to N4,000 for domestic flights. Dollar was exchanged for less than N50 at that time. N4000 was about $100; but how many airlines can charge $100 for a trip from Lagos to Abuja today? That should be over N50,000 but some still charge for as low as N25,000 and they quickly turn to the government everytime for bailout fund.
How do Nigerian airlines manage to maintain ridiculously low fares despite the tough economic situation?
 
The truth is that if airlines charge over N50,000 for their services it is barely enough. However, these airlines are involved in other businesses that aren’t known to the public. How else do you explain such uneconomic business decision. It also explains why they rush to the government to demand exemption from Value Added Tax (VAT), tax holidays, waivers on crafts and spare parts, among other fiscal incentives. Why can’t they run their businesses profitably? They also incur debts on all sides. They owe Nigerian Civil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Authority (NAMA), fuel marketers, as well as their workers. This is the scheme of affairs at the Nigerian aviation sector.
Sometimes, I think about all these issues and wonder if the nation’s aviation sector wouldn’t suddenly collapse one day.
Could this uneconomical approach of managing airlines have led to the collapse of the likes of Arik, Aero Contractors and others that died over the years?
If the NCAA had been diligent in checking the financial books of the airlines, most of them wouldn’t have collapsed. NCAA plays the role of the economic regulator but they aren’t doing their job. Another interesting development is that these airlines collapsed and they started using the failed airlines to steal money via the Assets Management Corporation of Nigeria (AMCON).
The debt is so much, but they should have called technical partners to show them the asset and allow the partners engage the owners on a strategy to salvage the crafts. AMCON took over these assets and said it has over 30 crafts but you wouldn’t be able to count 10 at the facility today. All the Arik aircrafts have been flown out of the country.

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