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Airports for Concession, Not Privatisation

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John Ojikutu

The Honourable Minister of State for Aviation has recently briefed the public and industry stakeholders of government plans to concede certain airports to private investors as part of larger plans to privatise some public enterprises. Following the Honourable Minister’s briefings, there have been some emotional reactions from the public and more too from aviation stakeholders who ordinarily should be better informed of what has, over the years, been the financial travails of the sector but yet find the government plans of airport concession unacceptable.

The government probably decided on concession and privatisation or outright sale because of the failed commercialisation of most public sector services and enterprises. There were public enterprises that were fully commercialised like the NLG and the refineries which were expected to operate as profit-making commercial ventures without any subsidies from the government. These are expected to raise funds from the capital market for capital projects without a government guarantee and were expected to use private-sector procedures in running their businesses.

There were other enterprises like FAAN and NAMA which were partially commercialised and were expected to cover their operational costs from their internally generated revenues (IGR). This category of enterprises enjoyed grants from the government to finance their capital projects, just as the federal government had done in the past for them with the ₦19.5 billion aviation intervention fund in 2007, the grant of about $200 million from the BASA fund for the refurbishment of some airports, and the $500 million loan from China for the redevelopment of the major international airports.

Using the air traffic and passenger traffic statistics of 2014-15, the expected yearly revenue from FAAN in particular, whose facilities are planned for concession, is reported to be about N65 billion from both aeronautical (N61.5 billion) and non-aeronautical (N4.5 billion) sources. However, the chunks of revenue earnings generated have not substantially impacted on the airport infrastructures and services. For instance MMA alone that is reported to be generating about ₦2 billion monthly is worth more than ₦3 billion monthly or ₦36 billion ($100 million annually) in earnings from passenger service charge aircraft landing and parking, on both international and domestic traffic and various concession on non aeronautical services within and around the airport. Unfortunately, the airport does enjoy up to 5% of the revenue for the periodic maintenance of the airport infrastructure and services. If MMA is given out for concession today in the global market, it could generate conservatively about ₦110 billion ($300 milliom). Today the total IGR earnings on the twenty international airports is less than ₦70 billion ($190 million).

The problems of government enterprises in the sector are largely caused by the incessant huge debts of the domestic airline operators to the public operators and weak accountability of the regulator particularly of the NCAA, which has the critical role to play in checking the excesses of both the airlines’ operators and the public operators FAAN and NAMA.

The Nigerian aviation sector is just one of the three major means of transportation, providing air transport services to less than 10 million Nigerians, compared to the road and rail providing transportation services for over 60 million Nigerians annually. Air services enjoy government patronage the most, with various forms of intervention, grants, and guaranteed loans. All these are in addition to the huge revenues generated that have not significantly developed or improved the airports’ infrastructure and facilities for sustaining safe air operations. There has been no efficient and effective oversight by the responsible authority to ensure that the sector in the last sixteen years complied with a five-year budget plan as required by the Nigerian Civil Aviation Regulations 2006, Part 18.10.5.

What has developed over the years in the industry is a mixed system, one of partial commercialisation, where the government injects subsidies or intervention funds into the public enterprises, and full commercialisation, where the government gives autonomy to some public enterprises in the sector. What the government plans to develop now, and what is developing worldwide, is privatisation and concession, where the government extends partnerships to private enterprises and investors to develop the sector. This is a concept that is being adopted by most developing countries whose aviation infrastructures are expanding fast but whose development funds are limited, as with our own case. Most countries are finding it a positive advantage to adopt the policies of public-private partnership (PPP), full commercialisation, and concession of public enterprises. These options offer government savings for other social sectors of the economy and reduce unnecessary costs and duplication of efforts.

Privatisation or outright sale of public enterprises to private investors in Nigeria, as articulated by a Social group in 1988 as part of Structural Adjustment Programme (SAP), could be emotive and controversial “Privatisation is a means of exposing public enterprises to private investors or bringing private ownership, control and management into public enterprises. The objective is to increase productivity and efficiency, and to improving the financial health of the public enterprises with sufficient savings for the government from the suspended government subsidies.”

Broadly defined, privatisation could include concession and all forms of PPP; but if narrowly defined, it would exclude concession and could mean outright sales. However, whatever definition is being applied, the objective is securing private investors’ management and operational expertise and investment, Similar to the MM2 concession to Bi-Courtney.

It still seems to some stakeholders that the concession of MM2 was shrouded in some kind of executive secrecy. The government, therefore, needs to assure stakeholders that the planned concession is with better intentions. Generally, there are three key features of a concession. Firstly, it does not involve the sale or transfer of ownership of physical assets, only the right to use the assets and operate the enterprise. Secondly, agreements are for a limited period of time, up to or less than thirty years depending on the context, content, and sector. Thirdly, the government, the owner of the assets must retain much involvement on the oversight in the concession through regulatory agencies.

It is expected that whatever the government would give out for concession would be well defined along these three features in order to avoid the pitfalls of past attempts. The government must bear in mind existing agreements or concessions with the Chinese government on the development of the four airports of Lagos, Port Harcourt, Abuja, and Kano, ditto with similar agreements with Bi-Courtney. The government must also be mindful of the fact that about twelve out of about twenty federal airports are joint users with the military, these include the international airports.

The government should be very clear in its plan as to what assets or infrastructure it would give for concession without disrupting the agreements with existing private operators and joint-users arrangements with the military. The plan for airport concession now should not include those aeronautical infrastructures, facilities, and systems that are necessary and critical for the conduct of flight operations, rescue operations, emergency management services, airport security systems, and national security. These are the state’s responsibility and mandatory obligatory functions to the ICAO as contained in various annexes to the Chicago Convention, essentially on aerodrome standards, air traffic control services, and airport security and so on. All these could be fully commercialized, as they are the practices elsewhere. The concession, on the other hand, should not be different from the one between the government and Bi-Courtney, and essentially for non-aeronautical infrastructural facilities and services which includes operations and management of the passenger, cargo terminal buildings and the handling facilities; aircraft parking areas with handling facilities, car, trucks, parks and toll gates.

All aeronautical facilities that are left in FAAN’s assets after the concession of non-aeronautical facilities could be merged with NAMA assets. Runways, taxiways and their associated lighting, and emergency and rescue management systems could remain part of the universal air traffic services systems. NAMA could, therefore, be fully commercialised like the ATNS of South Africa. FAAN, on the other hand, should function as a commercial holding company to oversee the management of the airports under concession.

The government should ensure that future management of the remaining domestic airports is included in the concession plans. In other words, none of these domestic airports should be left behind; otherwise, the initial reasons for the concession would be defeated. Therefore, for every international airport terminal available for concession to a company, three to four of the domestic airports should be given along with the concession.

The concession of airports, like that of the seaports in 2006, will increase capacity, invariably increasing air, passenger, and cargo traffic. It will reduce budget allocations to airports and increase revenue generation. The ports’ concession increased the capacity by over 300%; the cargo has increased from 7 million tons to about 25 million tons, and it has reduced budget allocations but has increased port revenue generation.

In addition to all these, the government should concern itself with the designing of achievable policies and programmes that would enable it to meet contemporary visions for the industry in this twenty-first century. Such policies should ensure that the responsible aviation authority provides the baseline for implementation of the concession, and the investors provide regular business plans every five years to meet the requirements of the Nigerian Civil Aviation Regulations, 2006, Part 18.10.5. The first-line approach is to ask: has the NCAA been ensuring that Bi-Courtney Airport Services complied regularly with the NCAR provision?

(Group Captain John Ojikutu (rtd) is an Aviation Security Consultant and Secretary General of the Aviation Safety Round Table Initiative)

This opinion article was written in May, 2016.

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Direct Flights Between Nigeria and Seychelles Soon, as both Countries Sign BASA

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Following the approval of the Federal Executive Council of the Memorandum on signing and ratification of Air Service Agreement between the Federal Republic of Nigeria and the Republic of Seychelles, the two countries have formerly ratified the Agreement.

Minister of Aviation, Senator Hadi Sirika using the platform of the ongoing International Civil Aviation Negotiation (ICAN) event holding in Abuja, led officials of the Ministry to sign Bilateral Air Services Agreement ( BASA) while the Republic of Seychelles Minister of Transport, Mr. Anthony Derjacques, signed on behalf of his country.

Nigeria’s Minister of Aviation, Senator Hadi Sirika signing the BASA with Seychelles

During the ceremony, the two Ministers underscored the importance of the BASA as it will promote air services and connectivity between both countries, enhance business, and promote tourism.

Seychelles Minister of Transport, Mr. Anthony Derjacques endorsing the BASA with Nigeria

According to a statement by the Special Assistant to the Minister of Aviation on Public Affairs, James Odaudu, the two Ministers agreed that the signing would further promote the African Union Agenda 2063 and called on citizens of both countries to latch on the opportunities of the BASA for their mutual benefits.

Meanwhile, the Federal Ministry of Aviation has either signed Memorandum of Understanding (MoU) and initial Air Services Agreement (ASA) with Senegal, Benin Republic, Ethiopia, Kenya, Finland, Cameroon, Morocco, Suriname, India, Sudan and Uganda.

The Ministry has also had discussions on how to further implement the open skies Agreement, signed 30 years ago, with the United States of America.

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Buhari Assures International Civil Aviation Organisation Of More Support

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President Muhammadu Buhari of Nigeria has assured the International Civil Aviation Organization (ICAO) that Nigeria will continue to offer more support by making significant investments in the provision of aviation infrastructure for a safe, secure, environmentally friendly and sustainable economic development of the international civil aviation sector.

President Buhari made the commitment on Tuesday in Abuja when he received the ICAO President, Salvatore Sciacchitano.

Recalling the long history between Nigeria and ICAO, the President said:

“Nigeria has been a member of the International Civil Aviation Organization (ICAO) since 1962, and has continued to make valuable contributions to the ICAO Council’s work and its activities.

President Buhari with his Chief of Staff, Prof Ibrahim Gambari, Aviation Minister Hadi Sirika, ICAO Council President, Salvatore Siacchitano, Immediate past ICAO President, Bernard Aliu during the visit

“This country has been playing a key role in supporting the implementation of ICAO Policies and Programmes internationally, and particularly in the African region.

“To this end, Nigeria has ratified all international air law instruments like the Montreal Protocol and amendments to some articles of the Chicago Convention,”

He told his guest that Nigeria was championing the cause of Aviation safety, security and facilitation in Africa.

President Buhari said, “I have recently signed into law Civil Aviation Act 2022. This is to reposition the industry to ensure continuous compliance with ICAO standards and to meet the challenges of a dynamic and rapidly growing air transport sector,” while assuring the ICAO President that the “Aviation industry in Nigeria is increasing by leaps and bounds.”

“I have also approved the establishment of Aviation and Aerospace University in Abuja to cater for research and development in the sector as well as the managerial challenges. In this regard, Nigeria has already started receiving the support of ICAO members like Qatar under the No Country Left Behind Initiative,”

The President expressed confidence that the aviation sector in Nigeria would continue to grow, affirming that “the roadmap of the Ministry of Aviation superintendent by Senator Hadi Sirika, is on course and together with other reforms of this administration will be sustained.”

While congratulating Mr. Sciacchitano on his re-election as President of the ICAO Council for the second term, President Buhari also appreciated the support Nigeria had enjoyed under his leadership, which, according to him, culminated in Nigeria’s re-election during the 41st Session of the ICAO Assembly.

The Nigerian leader informed the ICAO President that the aviation sector under this administration has more than doubled, noting that “It became the fastest growing of our economy Pre-COVID, according to the National Bureau of Statistics (NBS).”

According to him, “Passenger numbers were raised from 8 – 30 million. The five new airport terminals have added 50 million passengers to our capacity. All these within the time we are in government, namely seven and half years.”

The Minister of Aviation, Hadi Sirika, in a brief remark, informed the President that the ICAO Air Services Negotiation (ICAN) event being hosted by the Nigerian Civil Aviation Authority “will provide States, either on-site or participating remotely, with a central meeting place to conduct bilateral, regional or plurilateral air services negotiations and consultations, as well as networking opportunities for policymakers, regulators, air operators, service providers and other stakeholders.”

He expressed delight at the post-COVID recovery of the country’s aviation sector, describing it as the second best in the world.

The ICAO President told President Buhari that the meeting offered an opportunity of interaction between the participants from about 160 countries and the Civil Aviation Authorities in the country, adding that more than 4,000 agreements are being signed by way of bilateral agreements.

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International Civil Aviation Day: Nigeria Remains Committed to ICAO’s Ideals – Sirika

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As the global aviation community comes together to celebrate the 2022 International Civil Aviation Day, Nigeria’s Minister of Aviation, Senator Hadi Sirika has restated the nation’s commitment to the ideals of the International Civil Aviation Organization (ICAO).

According to Sirika, the theme for International Civil Aviation Day 2022 which is, “Advancing Innovation for Global Aviation Development” aligns with the belief of the Nigerian government that Aviation is a channel to achieving the development of other sectors as it remains the fastest and safest mode of domestic and international movement.
This belief, he says, has informed Government’s commitment to the development of the sector for which it developed a roadmap at the inception of the Buhari administration.

A statement the Special Assistant to the Minister of Aviation on Public Affairs, Dr James Odaudu quotes Sirika as saying that the implementation of the roadmap has led to a number of record-breaking achievements in the nation’s aviation industry which have been variously acknowledged and applauded by ICAO.

“Globally, it is a well known fact that aviation doubles every fifteen years but in the case of Nigeria, it has more than doubled and in another fifteen years, it will quadruple”.
“According to the National Bureau of Statistics , aviation became the fastest growing sector of the economy pre-covid and during covid, the third fastest growing sector and after covid, according to Airport Council International, ACI, we are at a 111% of pre-covid numbers. Apart from Colombia, we are the only country on earth that recovered so fast, and we have added even 11% of pre-covid numbers”.

These statistics, according to Senator Sirika, reinforce the continuous commitment of Nigeria to the ideals and aspirations of the International Civil Aviation Organization whose regulations have continued to guide the industry in ensuring the safety records that the country has established.

“The Minister, on behalf of President Muhammadu Buhari, the government and people of Nigeria, congratulates the President of the ICAO Council, Salvatore Siacchitano and members of the global aviation community presently in the country for the ICAN22 event on the Day and hopes that Nigeria will continue to have the privilege of hosting more ICAO events in the future” the statement read.

The purpose of International Civil Aviation Day is to help generate and reinforce worldwide awareness of the importance of international civil aviation to the social and economic development of States, and of the unique role of ICAO in helping States to cooperate and realize a truly global rapid transit network at the service of all mankind.

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