Expert identifies reason for failure of airlines in Nigeria

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SIRIKA, Nigeria's Aviation Minister

By Mbafan Ade (BUSINESS CORRESPONDENT) –

Activities of unviable airports has been identified as the factor responsible for failure of airlines in Nigeria.

An aviation expert, Mr Richard Aisebiogun, who states this on Wednesday, described the unviable airports as those airports which consistently record low passenger flights.

Aisebiogun, a former Managing Director, Federal Airports Authority of Nigeria (FAAN), was speaking during the Aviation and Cargo Conference organised by Mr Ikechi Uko in Lagos.

He maintained that for an airport to be viable and self-sustaining, it must have at least five million passengers a year, adding that the viability of an airport to survive is a function of its success.

According to Aisebiogun, “The success of airlines depend on the viability of the airports, so I will say the role of airports have contributed to the failure of airlines in Nigeria.”

“Airports should care about airline survivals because without traffic, airlines will not survive. From 1988 to 2012, 24 airlines failed and this has continued to occur,” he said.

He listed Lagos, Port Harcourt, Kano airports and some others as among highly viable airports in the country.

Aisebiogun’s views are coming in the wake of moves by the Nigerian government to concession the terminals of the country’s four major international airports.

The airports affected in the concession exercise are the Murtala Muhammed International Airport in Lagos, the Nnamdi Azikiwe Airport in Abuja, the Port Harcourt International and the Mallam Aminu International Airport, Kano.

With the commencement of the final phase of the concession plan, Minister of Aviation, Hadi Sirika who promised there would be “no job will be lost”, to the concession arrangement, also assured that there would be full negotiation with workers before the full implementation of the programme.

But unions in the aviation sector described the arrangement as “unrealistic”. They faulted the model being adopted.

A document released by the Permanent Secretary of the Ministry, Hassan Musa, in compliance with the cinditions set by the Infrastructure Concession Regulatory Commission (ICRC) and National Policy on Public-Private Partnership made available the guidelines.

It said: “The Federal Government of Nigeria (FGN) through the Ministry of Aviation is inviting bids from reputable Airport Developers/Operators/Financiers/Consortia for prequalification for the Concession of selected Airports Terminals under a Public-Private Partnership (PPP) arrangement.”

“The airport’s terminal concession is one of the critical projects under the Aviation Sector Roadmap of the FGN and fits well within the scope of the Ministry’s strategic plan for the sector. The execution of this project is meant to achieve the Federal Government’s objective in terms of air transport value chain growth by developing and profitably managing customer-centric airport facilities for safe, secure and efficient carriage of passengers and goods at world-class standards of quality”.

The eligibility requirements include : “Full names of firm/consortia; Evidence of Company Registration; Ownership structure of bidding entity; Audited Financial Statements; Sworn affidavit; Power of Attorney/Board Resolution and in the case of a consortium, evidence in the form of a letter of association agreement.”

It explained that to be prequalified for consideration as a prospective PPP partner for the project, the prospective firms/consortia must have technical, operational and financial capability including; Experience in the Development and Operation of an International Airport and Cargo Terminals; Evidence of Financial Capacity in support of the company or consortium’s ability to undertake the airport concession illustrated by a minimum net worth of NGN 30 billion and Letters of Support from credible financial institutions in support of the consortium’s ability to manage and operate the Airports terminals.

The document urged the interested international parties to partner with local firms in compliance with the requirements of the Federal Government of Nigeria local content development policy.

*Concession will be fair to workers, partners

Sirika said state governments would not be allowed to participate in the concession process.

He said: “The Nigerian airport concession will be terminal. This answers those who are asking whether our runways and our critical security will be part of the concession, no, it will not be.

Aisebiogun called for improved service delivery and infrastructural development to trigger multiple operations within the nation’s airports.

He, however, advised the unviable airports to look at measures that could engender traffic to those areas like boosting local tourism.

“The way forward for the Nigerian aviation industry generally is to set up aviation development fund to close all viability gaps.

“Upgrade of airport infrastructure is really needed and there should be a hybrid public-private-partnership within the sector.

“We must lobby the multi-lateral institutions like the Africa Development Bank to prioritise and fund aviation sector initiatives in Nigeria,” jhe said.

Dr Daniel Young, Managing Director, Daniel Young Global Investment Limited, advised local airlines to re-strategise as they had been operating on wrong business model which was the reason they were not making enough profit.

Young said that FAAN should also look inwards on ways to generate revenue as it was observed that it had been operating below resource capacity.

Group Capt. John Ojikutu, an Aviation Security Consultant, also urged airlines to review their business plans to remain in business.

Ojikutu also advised on airport classification which would put the unviable airports on their toes to upgrade their facilities.

For Chris Aligbe, he expressed his supports for the Federal Government’s move to concession Nigerian airports which would help in properly positioning them. (With additional report by NAN)

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