Nigeria Air: the tragedy of sentimental wisdom, By Dan Agbese
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Were it not so tragic, it would be funny; something to make you laugh until tears wash down your cheeks. Check it out. Nigeria, in the patriotic view of the Buhari administration, deserves a new national carrier, nearly twenty-two years after Nigeria Airways sadly went the way of our national waste and want.
If the federal government expected applause, it received none. No shaking. Not a few experts and non-experts alike criticised the decision, telling the government to find something better to do with its wealth, as in buy more SUVs for Niger Republic, rather than waste it on a new national carrier that will, at best, have its five minutes of fame in the aviation industry and sooner than later become history. No shaking.
Apparently, we were all talking rubbish. We were not offering superior wisdom but in the nature of human interaction, merely alternative views to enrich the decision-making process. The federal government has a superior wisdom and with it, Nigeria Air is set to hug the skies in December this year. It is, not, truth be told, a shame that the country with the largest economy in Africa can sustain neither a national carrier nor a national shipping line. Nor is it a shame that a smaller African country, such as Ethiopia, can successfully run its aviation industry while the giant of Africa lumbers in apparent confusion, with the giant trying to catch up with the little guy. It is not the natural order of things, as Thomas Paine might have argued, for a smaller country to lead a bigger country. That, as this narrative will show, is the real national shame.
Hadi Sirika, the minister of aviation, announced last week that the new national carrier will be owned by a consortium of investors led by Ethiopian Airlines with 49 per cent of the equity shares. The federal government will hold five per cent of the shares and other Nigerian companies and individuals will hold the rest of the shares. In this arrangement, Ethiopian Airlines is described as a minority shareholder whereas with 49 per cent it holds the single largest share in the new company. A minority should be more minor than this. You see, we wanted to set up a national career and ran to Ethiopia Airlines to come and drive the venture. It is a big difficult to process.
The new airline will be launched in this last quarter of the year. And it gets more interesting. For its launch, it will dry-lease three B737-800 series from Ethiopian Airlines. It will run a shuttle service between Abuja and Lagos before finding its feet. Is this what the $250 million investment will buy in the new airline for the country? Clearly, the minority shareholder is in the driving seat of this new national venture that has all the wisdom but lacks hard-headed wisdom.
Aviation is a vibrant industry in our country. It has a special attraction for Nigerian investors who believe that the industry is a cash cow. It may not have been so proven, but the investors are working against crushing odds that are not conducive to the successful operation of the industry. The federal government has not been of much help to this vital industry critical to modern transportation and economic development. That is the challenge the government should tackle rather than misadvise itself into gambolling where other modern governments have feared to tread.
I have written at least two columns questioning the wisdom of floating the new national airline. Let me fall back on excerpts from my column of July 29, 2018. I still stand by my argument put forward then. I wrote: “The federal government has truly ill-advised itself to embark on a venture that has perhaps rhyme in politics but no reasons in contemporary conventional business wisdom.
“The minister of state for aviation (now minister of aviation), Hadi Sirika, unveiled both the name and the logo for the new national carrier, Nigeria Air, a few days ago at the Farnborough International Air Show in London. He said that the new airline would be private sector-driven because the federal government would own only five per cent of the equity shares in the company and that the “government will not be involved in running or deciding who runs it.”
“It is said that if at first you do not succeed, try, try again. Nigeria Airways Limited rose from the ashes of the West African Airways Corporation floated by the British colonial authorities. It was a joint venture between the Nigerian government and two foreign companies – Elder Dempster and BOAC. The Nigerian government held the majority equity share of 51% while Elder Dempster and British Airways Overseas Corporation held 32% and 161/3% respectively. In 1961, the government bought out the other two partners and assumed 100% ownership. As you can see the federal government back then appreciated the wisdom of private/public partnership. So, what is new?
“Nigeria Airways had everything going for it. Money was no problem. The government pumped money into it. And creditors supported it. It was for many years the only airline in the country. In its halcyon days in the 1970s and 1980s, it had more aircraft in its fleet than any other airline on the continent. About 30 or 40. It had almost every aircraft make in the world in its fleet – Airbuses, DC, some 21 different series of Boeing, BAC, Fokker Friendship; the whole lot.
“These treasures did not save it. It began to gradually abandon the sky. Someone then realised that its problem might have something to do with its logo – a flying elephant. Elephants do not fly, the smart Alex advised the government. The eagle was summoned to the rescue as the appropriate logo of the airline. But the worm was steadily eating its way into the apple. Sometime in 1979, the federal military government brought in KLM to help our people run an efficient and profitable national carrier. Things went from bad to worse as soon as KLM left.
“By 2003, it was clear to the federal government that it could not save the airline from going under. It had a $528,000,000 debt burden hanging on its neck. And only one serviceable Boeing 737-200 series in its sorely depleted fleet. And so, Richard Branson came in. Nigeria Airways became Virgin Nigeria. He left and the federal government sold it to Jimoh Ibrahim for a song. It took on a new name: Air Nigeria. And now we have Nigeria Air.
“The deregulation of the aviation industry in the eighties brought in a slew of investors in the industry. It was a lively industry ruined by poor regulation. Anyone who could put up a bank loan floated an airline, brought in one or two aircraft on wet lease and went into business. Some of those aircraft had passed their expiry dates. They were so poorly maintained that they soon began to tumble disastrously down from the skies.
“There is something amusingly courageous in the government decision not to let the failure of Nigeria Airways Limited stop it from trying again at running a new national carrier. The problem is that it is a sentimental courage. The decision to float a national carrier can be faulted on several grounds.
“We take two. One, it is neither necessary nor desirable that we have a national carrier. There is nothing particularly important about a national carrier. If there were, we know the countries that would be flying their national flags on their national carriers. Is there anything to suggest that Nigeria Air would fare better than Nigeria Airways just because the government would hold only five per cent of the shares? Do we have any reasons to believe that the factors that ruined Nigeria Airways Limited would no longer converge in Nigeria Air? What is likely to happen is that driven as this decision is by sentiment rather than by hard-headed economic and business sense, good money would go down with a decision that came from the heart. Disadvantaged? The Nigerian state.
“Two, a new national carrier is a backward march for the country. The days when federal and state governments had their fingers in every pie are long gone. The current conventional wisdom is to free the public sector from competing with the private sector in any shape or form. The privatisation policy introduced by the Babangida administration achieved this objective in that federal and state governments were forced to give up their ambition to compete and compete poorly with the private sector in their areas of core competence.
It is right and proper for the government to show interest in the success of the aviation industry. Its duty is to support the private airlines by creating a conducive business environment for the aviation industry. The airlines are struggling to survive with the increasingly higher cost of aviation fuel. The investors are not there for fun; they are in it to run a successful airline that turns a handsome profit for their investors. Let us march forward, armed with the conventional wisdom to restrict government to setting policies and policing them in the industry to make it safer and more attractive to local and foreign investors.
