Indigenous Airline Operators Stage Opposition Against Nigeria Air

mms plusAugust 19, 2018

0 640 7 minutes read

Indigenous Airline Operators Stage Opposition Against Nigeria Air

FG seeks N1.2bn for Enugu TTP
Kogi donates 40 hectares, needs N4.8bn

Indigenous airline operators have risen against the Federal Government’s idea of providing a seed fund of $300m as 5 percent equity holding in the proposed new Nigeria’s national carrier, Nigeria Air, arguing that it is unfair business practice to exploit them via tax to support a competitor.

Meanwhile, the Truck Transit Park(TTP) project initiative in the country has got a boost with the presentation of the Outline Business Case(OBC) compliance certificate on the Obollo –Afor TTP to the Nigerian Shippers’ Council(NSC) by the Infrastructure Concession Regulatory Commission(ICRC) .

In what seems a collective stand of the local airline operators in Nigeria, the Public Relations Manager of Air Peace, Chris Iwarah, told MMS Plus, “It will be unfair for anybody to utilize public funds to support some category of investors. It will be discrimination and against the laws of the country. Everybody who is a Nigerian must be treated on the same platform. You cant create a group of special investors.”

Calling for a level playing ground for all investors, Iwarah noted, “ If anything, it is those who have invested in the sector without any aid or grant and at a certain time when the sector was showing no hope or prospects for profitability that should be encouraged. Investors like Air Peace who dared to take the risk to invest in the aviation sector deserve more support from the government.”

However, he added that a “level playing field must be created for every operator in the aviation sector when Nigeria Air comes onboard. If Nigeria Air is 95% private sector driven, it would be inappropriate to take the monies Air Peace pays as tax to support Nigeria Air against Air Peace”.

According to him, the local operators support the initiative, Nigeria Air , adding, “ In fact, at Air Peace. We have been advocating that government should come in to support the industry but the support must be across board. For instance, if the government is giving any player in the industry N50million, the government should give Air Peace N50million and any other airline the same N50million. If the government does this, there would be no crisis in the sector. However, I can assure you that Air Peace isn’t threatened by any organization because we believe we have a business model that is unrivalled and we are ready to ride on that to achieve success. People are already amazed at our rapid success in just four years.”

The recent unveiling of the proposed new Nigeria Air in London by the Minister of State for Aviation, Mr. Hadi Sirika has elicited thunderous comments, especially over the finance model which is a mixture of government budgetary provision, private equity debt management and finance syndication from a consortium of regional and international banks.

ICRC came to the rescue of the Minister to explain the ambiguity and absurdity veiling the national carrier feasibility . Of about $300 million funding estimate for the entire airline start-up operations in 2018, the ICRC said the federal government will provide $55 million upfront grant/viability gap funding.

Out of the amount, $8 million would take care of acquisition of offices for the official take-off of operations, cash flow requirements, payment of commitment fees for aircraft to be leased for initial operations and deposit for new aircraft.

The airlines’ financial model shows about $100 million would be required for 2019 operations and $145 million for 2020, with the remaining financing to be determined by equity contributions expected from the strategic equity partners.

To be modeled after the Nigeria LNG joint venture structure, the ICRC said at start-up government would own majority equity in Nigeria Air Limited, with management to be concessioned to the strategic equity investor.

After one year of operations, government would be expected to divest her equity by issuing an initial public offer (IPO) approved by the Securities and Exchange Commission for Nigerians acquire shares in the airline.

“Government will retain only 5% equity (after the IPO), while the rest of 95% equity will be owned by the strategic equity investor and the general public,” the commission said.

To enable the airline benefit from the bilateral air services agreements (BASA) and other such agreements requiring local beneficial ownership as a condition, the law expects Nigerians to own majority stake in the company.

To become fully operational as a public-private partnership (PPP), the company is expected to develop through three stages, namely development, procurement and implementation.

The development stage was recently concluded with the approval of the outline business case and the issuance of a certificate of compliance by the ICRC.

During the procurement stage, requests for qualification (RFQ) and proposal (RFP) would be issued to pre-qualify and select PPP partner, after which information memorandum and RFP bidding process would be published.

“It is only after the PPP procurement process that the strategic equity investor will be known. At that point, Nigeria Air Ltd will become a public company subject to SEC, NSE and relevant CAMA rules for public companies,” the Commission said.

To ensure its viability, the ICRC said the Federal Ministry of Transportation would facilitate a Bill to be sponsored in the National Assembly for an Act making it mandatory for public officials to use the airline for their official trips.

“The Act will demand that any official travelling on a ticket bought with public funds must travel on a Nigerian carrier, unless the route is not served by a Nigerian carrier,” the commission said.

In another development, Presenting the certificate on Thursday in Abuja, the Acting Director-General of ICRC, Dr. Chidi Izuwah said the commission would keep an eye on the projects throughout their life circle.

With this exercise, NSC as the project facilitator now seeks concessionaires under Public Private Partnership(PPP) arrangement to invest in the project whose actual cost has been determined to be N1.2 billion

Enugu State government had donated 17 hectares of land for the project while the Kogi State government had also given 40 hectares of land for the development of the ultra-modern transport infrastructure estimated to provide 15,000 jobs in their various locations. Meanwhile, as the OBC for Lokoja location is expected, a feasibility report on it says that it needs N4.8billion for its take –off.

Obollo –Afor is Udenu Local Government Area of Enugu State, with a prime position and advantage of cashiew and banana export .

The NSC had appointed a Transaction Adviser who prepared the OBC and the Project Structuring Report(PSR) the basis on which the certificate of compliance was given to the council. Consequently, the project will move to procurement stage.

At the presentation ceremony were the representatives of Enugu State government, Federal Ministry of Transportation, Federal Ministry of Finance, transport unions, among others.

The Executive Secretary of the Nigerian Shippers’ Council (NSC), Hassan Bello, has stated that Enugu and Kogi states will kick-start the planned Truck Transit Parks (TTPs) to be sited in eight locations across eight states of the federation.

TTP is a transport infrastructure developed by the NSC to facilitate trade in the country and ensure safety of lives on the highways.

Speaking at the event,the Executive Secretary of the NSC, Barr. Hassan Bello, stated that Enugu and Kogi states would kick-start the planned TTPs to be sited in eight locations across eight states of the federation.

TTP is a transport infrastructure developed by the NSC to facilitate trade in the country and ensure safety of lives on the highways.

The eight locations identified as economically viable for the construction of the TTPs include: Port Novo Creek, Lagos State; Ogere, Ogun State; Onitsha,Anambra State; Jebba,Kwara State; Lokoja, Kogi State; Ore, Ondo State; Obollo-Afor, Enugu State.

The facility has in-built business incubation centers to boost the micro, small and medium enterprises (MSMEs) as well as other recreational facilities.

Not less than 15,000 job opportunities will be created when the project becomes fully operational, according to the facilitators of the project in locations.

The NSC, which is the nation’s Port Economic Regulator and the representative of the Federal Government isfacilitating the development of the TTPs to boost local and international trade in the country.

Shedding more light on the project, Bello, said: “A Truck Transit Park is a public rest area located off the road, designed to provide temporary rest location for truck drivers. It is primarily intended for short-term safety breaks and also longer-term parking services in high-use transport corridors.”

He said, “Transport is a critical determinant in the conduct of international trade and impacts on national economies. The availability, quality, cost and efficiency of transport services influence the trading environment and the competitiveness of export goods on the international market as well as the cost of imported goods. In this regard, the Nigerian Shippers’ Council serves as an agent for economic development through interventions in the cost moderation and cargo transport issues resulting in positive impact on inflationary trend in the country.”

Bello further explained that as part of its ports economic regulatory duties, the NSC is to liaise with the host state governments of the TTPs to ensure the provision of the infrastructure and other facilities on the project sites.

“So far, Kogi State Government has allocated about 40hectares of land at Ohono village along Lokoja-Abuja highway for TTP project, while Enugu State Government has allocated about 50 acres of land at Obollo-Afor in Udenu Local Government Area for TTP project. Kaduna State Government is developing TTP projects at Mararaban Jos, Tafa and Buruku for heavy duty trucks, as two locations have been procured while the third one is expected soon, “he said.

According to Bello, the TTP projects will be delivered through public private partnership, which entails mobilising private sector resources for national development, adding, “TTP project is one of the strategies to fast-track the bridging of infrastructure deficit particularly in the transport sector”.

Bello noted that it is the responsibility of the host state governments to identify and allocate suitable land free of all encumbrances’; provide basic infrastructure such as electricity, water, access road and security.

He added: “will protect import and export cargo on haulage vehicles and general road safety; it will reduce accidents and damage to cargo caused by fatigue and associated risk costs; it will reduce pilferage and theft of cargo in transit due to enhanced security; it will afford cargo owners the means to monitor the movement of the cargo through a tracking system in TTP network; it will improve transit to hinterland locations as well as transit cargoes to landlocked countries; the TTPs will also bring about increased Internally Generated Revenue(IGR), employment opportunities, wealth creation and boost local economies of the states, among others.”