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Nigeria Air: Experts fault FG’s operational model for new carrier - VANGUARD

AUGUST 12, 2022

• Running national carrier under wet lease absurd — Stakeholders

By Prince Okafor

At the backdrop of the foreign exchange crises and rising unemployment, stakeholders in the aviation sector have faulted the operational model of the new national carrier, Nigeria Air, especially the take-off plans.

The Minister of State for Aviation Hadi Sirka, last week hinted that the national airline would start with a wet lease of three aircrafts soon.

But some industry stakeholders told Vanguard Aviation World that the implication of the take-off model was a total disregard of the earlier stated rationale for setting up the airline.

Sirka had said the airline would create employment in the sector while conserving foreign exchange.

But the wet lease model would mean taking both the foreign aircraft along with the foreign crew that would be paid salaries and allowances in foreign currency. Also the maintenance and other services would be done by the owners of the aircraft off shore.

The stakeholders argued that running such a national carrier model in the present economic situation of the country is absurd and signals that the federal government lacks understanding of the aviation business terrain.

It would be recalled that the nation’s proposed national carrier which is expected to provide scheduled and non-scheduled services, was unveiled at the Farnborough Air Show in the United Kingdom in July 2018, two months after, it was suspended. The proposed airline was expected to gulp $8.8 million in preliminary cost and $300 million as takeoff cost.

As a move to revive the new carrier, in June 2022, the airline was unveiled, and it received an Air Transport License (ATL) from the Nigerian Civil Aviation Authority (NCAA), which will run for five years.

Last week, the Federal Executive Council, FEC approved the lease of three aircraft for the commencement of operation by the national carrier.

Stakeholders kick against wet lease

While reacting to the development, the Principal Managing Partner, Avaero Capital Partners, Sindy Foster, noted that the arguments in favour of the national carrier are that it will increase capacity, reduce the cost of tickets, and add employment.

“However, it will likely operate at the expense of the domestic airlines, backed by government money, and all the largesse that goes with that privileged position. Therefore, it will disadvantage domestic airlines who won’t be able to compete with the bulk purchasing of fuel, or the dollars which appear to be available to the national carrier; so instead of increasing the market, the market will retract.

“The three aircraft which the national carrier is bringing can easily displace 10 aircraft of airlines currently struggling. When supply retracts, prices will go up.

“In terms of employment, the project is starting off on the wrong foot. It has been reported that the three aircraft will be wet-leased which means that the crew will not be Nigerian. For a national carrier which was positioned as a generator of employment for Nigerians, this will be a kick in the teeth.

Similarly, the President of Aircraft Owners and Pilots Association, Capt. Alex Nwuba, stated that the airline can hardly survive with wet lease aircraft.

In his words: “The market exists. Airlines are operating in this market, they have challenges with the price of fuel, and they have challenges with foreign exchange to pay suppliers. You even have the challenge of airlines that are selling tickets; hundreds of millions of dollars that cannot repatriate those funds. How will these three planes operate on the basis of wet lease?

“So how does that solve our problem as a nation in terms of creating employment as an industry? How does that solve the problem of foreign exchange that we are already facing because we had to pay for that wet lease in foreign exchange?

“How does that solve the problem of availability of funds through the central bank or will the national carrier get its money through the black market to fund its operation? It is absurd; it’s essentially an absurd proposal made to a group of people that have no knowledge of what’s going on…”

Background of National carrier

It was gathered that national carriers are more common in Africa, but are not necessarily seen as a necessity elsewhere.

Neither the United Kingdom nor North America, which are two mature aviation markets has National Carriers. African National Carriers are expensive to run because they typically are not run on purely commercial lines.

There are exceptions Ethiopian Airways, Egypt Air and Air Maroc seem to have managed to make commercial decisions. But there are many African national carriers which have failed including Nigeria. Whilst Kenya Airways and South African Airways lurch from one financial crisis to the other.

Like Nigeria Airway, nothing change

Virgin Nigeria replaced the defunct Nigeria Airways, which was founded in 2004 as a joint venture between Nigerian investors and the Virgin Group.

Aviation World gathered that Virgin withdrew from the business between 2008 and 2010. Following two name changes, (Virgin Nigeria Airways and Nigerian Eagle Airlines), Air Nigeria announced in September 2012 that it had made its staff redundant and ceased operations in September 2012.

However, Foster noted that, “We would need to ask ourselves what really has changed in terms of psychology, behaviour and attitude to lead to a different outcome this time. It has already started with what can best be described as “sketchy” behaviour.

“Given the perilous financial circumstances Nigeria has been in since 2016 it would have made more sense to designate flag carrier status to private airlines with capacity and international ambition. Some of these airlines, such as Air Peace, have been flying the flag around the world during covid and have further regional and international ambitions which the government should support.”

Way Forward

Meanwhile, given where we are currently with the forex and fuel crises affecting domestic airlines, Foster added that with the fact that we have not yet attracted investors for the national carrier project, it would make sense to pause the launch to stabilise the industry.

“We need to solve the problems before adding to the forex scarcity and fuel scarcity problems with a new privileged and preferential airline.”


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