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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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Aviation

Relief for Dubai Travellers, as Emirates Resume Flights to Nigeria October 1

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After what has been like waiting for godot for travellers between Nigeria and the United Arab Emirates, the Emirates Airlines has announced that it will resume services to Nigeria from 1 October 2024, operating a daily service between Lagos and Dubai, and offering customers more choice and connectivity from Nigeria’s largest city to, and through, Dubai.

According to Kazim, Emirates’ Deputy President and Chief Commercial Officer, “We are excited to resume our services to Nigeria. The Lagos-Dubai service has traditionally been popular with customers in Nigeria and we hope to reconnect leisure and business travellers to Dubai and onwards to our network of over 140 destinations.  We thank the Nigerian government for their partnership and support in re-establishing this route and we look forward to welcoming passengers back onboard.”

With the resumption of operations to Nigeria, Emirates operates to 19 gateways in Africa with 157 flights per week from Dubai, with further reach to an additional 130 regional points in Africa through its codeshare and interline partnerships with South African Airways, Airlink, Royal Air Maroc, Tunis Air, among others.

As a major economic hub in Africa, Nigeria and the UAE have built strong bilateral trade relations over the years, headlined by Lagos as the nation’s commercial centre. With the resumption of daily passenger flights, the airline’s cargo arm, Emirates SkyCargo, will further bolster the trade relationship by offering more than 300 tonnes of bellyhold cargo capacity, in and out of Lagos every week.

“Emirates SkyCargo will support Nigerian businesses by exporting their goods via its state-of-the-art hub in Dubai, into key markets such as the UAE, Malaysia, Hong Kong, and Bahrain, among others with key anticipated commodities such as Kola Nuts, food and beverages, and urgent courier material. Emirates SkyCargo will also import vital goods such as pharmaceuticals and electronics as well as general cargo from key markets such as the UAE, India and Hong Kong. Keeping trade flowing seamlessly, these goods will be transported quickly, efficiently, and reliably via the airline’s multi-vertical specialized product portfolio.

“The Emirates Boeing 777-300ER serving Lagos will operate with 8 First Class suites, 42 Business Class seats, and 304 seats in Economy Class. Offering the best experience in the sky, passengers can dine on regionally inspired multi-course menus developed by a team of award-winning chefs complemented by a wide selection of premium beverages. Customers can tune in to over 6,500 channels of global entertainment, including 23 Nigerian movies, in addition to series and other content on ice, Emirates’ award-winning inflight entertainment system” he concluded.

Emirates, had in November 2022, suspended flight operations to Nigeria over its inability to repatriate its revenue from the country. The federal government had, in September 2023, said the airline would resume services in Nigeria after President Bola Tinubu had met with  President Mohamed bin Zayed Al Nahyan of the UAE in Abu Dhabi, signalling a resolution of the dispute.

Even after the Central Bank of Nigeria announced that it had cleared the foreign exchange backlog inherited by the Tinubu government, the airline still dithered until the latest announcement which was conveyed in a correspondence to the Minister of Aviation, Festus Keyamo (SAN) on Wednesday.

 

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Aviation

Private Jets Operating Commercial Services to Lose Licences – NCAA DG

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The Acting Director-General of the Nigeria Civil Aviation Authority (NCAA), Captain Chris Najomo has warned that all private jet operators operating commercial charter services risks loosing their licenses.

He gave the warning in Lagos on Friday during the media unveiling of his vision board for year 2024 tagged NCAA Project 2024.

The Ag.DG, who expressed concern over the illicit activities of illegal private jet operators in the country, said if private jets wants to operate as commercial or charter operators, they should apply for the commercial licences.

Highlighting the regulatory provisions, Najomo noted that only holders of Air Transport Licence (ATL) and Airline Operating Permit (AOP) with a valid Air Operator Certificate (AOC) are authorized to conduct charter operations.

He also stated that NCAA will cease offering services to all debtors, who have refused to payment the NCAA and federal government monies owed them, noting that almost all airlines are guilty of this.
Nigerian airlines are currently indeed to NCAA in billions of naira.

He also said the NCAA is committed towards simplified certification and licensing processes as this will ensure ease of doing business.

Najomo further stated that one of his 2024 projects is to Ensure improved staff welfare, training, retraining and reorientation of staff.

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NDLEA Arraigns SAHCO Manager, 7 Staff For Aiding Drug Trafficking

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An Assistant General Manager of Skyway Handling Company (SAHCO), Olajide Ahmed Kafidipe, and seven other staff of the company, were today, arraigned before a Lagos Federal High Court, on charges bordering of conspiracy, unlawful importation and possession of 1, 440.90 kilograms of Tramadol.

Olajide and others were arraigned before the court presided over by Justice Deinde Isaac Dipeolu, by the National Drug Law Enforcement Agency (NDLEA).

The seven staff of the company arraigned alongside Olajide were; Sanyaolu Rasheed Oladele; Musa Mutalib Opeyemi; Sanamo Alla Daniel; Anuge Evans Isibor; Mahmud Agboola Musa; Udeh Felix and Obinna Henry.

The prosecutor, Mr. Abu Ibrahim, while arraigning the SAHCO staff, told the court that all the defendants conspired with the trio of Mubarak Sarki Salami, Abdullahi Aliyu a.k.a Aboki and Anwal Monday, who also staff of the company but now at large, to commit the offences on or about October 25, 2023.

The prosecutor, Mr. Ibrahim further told the court that the Assistant General Manager of SAHCO, Olajide and other staff of the company, conspired amongst yourself to transport 1, 440.90 kilograms of Tramadol 225mg, a Narcotic, from SAHCO Import Shed.

The prosecutor also told the court that the SAHCO’s Assistant General Manager, Olajide, conspired with Sanyaolu Rasheed Oladele, and procured one Lawal Itunu Temitope, to transport the prohibited substance from SAHCO Import Shed in a Mercedes Benz Bus with Registration Number LAGOS MUS 269 YC, belonging to Platinum Pacific International Limited.

He further informed the court that another staff of SAHCO, Sanyaolu Rasheed Oladele, unlawfully possessed the said 1, 440. 90 kilograms of Tramadol 225mg, a Narcotic Analgesic.

The prosecutor told the court that the offences committed by the defendants, contravened sections 14 (b), 21 (2)(d) and 20 (1)(c) of the National Drug Law Enforcement Agency Cap. N30, Laws of the Federation of Nigeria, 2004. And punishable under sections 11 (b) and 20 (2)(b) of the same Act.

All the defendants denied the allegations and pleaded not guilty to the charges.

Following their not guilty plea, the prosecutor asked the court for a trial date and also urged the court to remand them in the custody of the Nigerian Correctional Services (NCoS), till the hearing and determination of the charge.

However, lawyers to the defendants, told the court that they have filed their clients’ bail application except that of the Assistant General Manager, Kafidipe Ahmed Olajide and Obinna Henry.

The lawyer therefore asked the court for a short date, to enable them file the bail applications for the duo.

With the development, the prosecutor, Mr. Abu Ibrahim, urged the court to remand all the defendants in NCoS’ custody till when the court will hear their bail applications.

But the trial judge, Justice Dipeolu, in his reasoning, order the operatives of the NDLEA to call their Airport Commander, to allow the defendants to be remanded in their custody till tomorrow, January 17, when their bail applications will be heard and determined.

Upon the complied with the court’s directive, which was granted by the Commander, the court ordered the remand of all the defendants in NDLEA till tomorrow, while adjourned to January 24, 2024, for the commencement of their trial.
Source: Ontimenews.com

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