Just last month, Nigeria announced that it has chosen Ethiopian Airlines (ET), Africa’s leading airline, as the core investor and technical partner for its new national carrier. This confirmation ended months of speculations about the identity of the airline’s core investor.
The East African carrier was one of many organisations to place a bid on Nigeria Air. In a recent Facebook post by the official account of Nigeria’s Ministry of Aviation, it was explained that ET was chosen because it had demonstrated that a government-run airline could be profitable, as well as for its status as an African airline with global prestige.
News of Nigeria Air first came to light at the Farnborough Airshow in England in June 2018, when the airline’s name and logo were unveiled by Nigeria’s Minister of Aviation Hadi Sirika. However, the project was put on hold following concerns from critics, mainly about the use of limited public funds to mobilise the airline. The airline was estimated to take up an initial $8.8 million preliminary cost and another $300 million as take-off cost.
Instead, the government was advised to find strategic partners to fund and manage the airline.
Four years later, the government has finally been able to attract private investors to establish the national carrier, which will be a private-public partnership. Ethiopian Airlines will own a 49% stake in Nigerian Air, while the Nigerian government will own a 5% stake and a consortium of private businesses will own a 46% stake in the airline.
ET will not be investing cash into the new airline, but will instead be providing technical training, equipment, and using its wealth of management expertise to establish the national carrier. To kick off, plans to train pilots for certification on some aircraft in Addis Ababa are already in motion.
At the World Government Summit at Dubai Expo in March, Minister Sirika asserted that the airline would be ‘100% privately run, with no government control, no membership on the board, and committed to the private sector’. This is promising since the Nigerian government has a propensity for corruption and mismanagement of funds which led to the closure of the country’s first national carrier, Nigeria Airways, in 2003.
About two decades later, a new national carrier is set to take the skies. Nigeria Air is expected to launch its first scheduled flights in 2023, with its 3 dry-leased Boeing 737-800’s. The jets will each offer 16 business class seats and 150 economy seats.
The Ministry of Aviation shared via Twitter that the airline was seeking applications from qualified, experienced pilots, cabin crew and engineers.
ET will also be providing the carrier with some Bombardier Dash 8 and Boeing 737 NG aircraft, according to a report by THISDAY.
The airline, rather ambitiously, plans to have a fleet size of 30 aircraft within its first three years of operation, and recently revealed that China’s COMAC C-919 may be part of this fleet. It would be a natural step for Nigeria, considering the strength of the two countries’ trade relationship.
Mr Sirika shared that the airline would start by serving domestic routes, before taking on international, regional and intercontinental routes. Boeing 787 ‘Dreamliner’ aircraft will be acquired for international routes in the future.
Nigeria’s partnership with Ethiopian Airlines could be the impetus of a new era in the African giant’s aviation sector, possibly returning it to its former glory. However, there are some concerns about the intent of the former’s interest in the new national carrier. These are worth exploring, in light of Nigeria’s aviation history and ET’s history with intra-African partnerships.
Nigeria’s Turbulent Aviation History
Nigeria has a large travelling population – one of the largest in Africa. In 2021 alone, air passenger traffic in Nigeria was as high as 15.2 million, including both domestic and international traffic. The number for 2022 will certainly increase, as there has been an astounding increase in its emigration rate – termed the ‘japa wave’ – in light of the economic and political issues bedevilling the west African country.
However, this large travelling population has been unserved by a national carrier for years. Many Nigerian travellers have had to rely on numerous international airlines to reach their destinations, especially the ones local, smaller airlines are unable to reach.
A year after the first national carrier shut down in 2003, Virgin Nigeria – later Nigerian Eagle Airlines and then Air Nigeria – was established to take its place. The carrier was not government-owned, but was instead a joint venture between England’s Virgin Atlantic and a group of Nigerian investors. Virgin backed out of the venture between 2008 and 2010 and then in September 2012, Air Nigeria ceased operations completely after being grounded by regulators over safety concerns.
When Virgin was still in the picture, there was an acrimonious dispute concerning a forceful move of the airline’s domestic operation to Terminal 2 of the Murtala Muhammed Airport by the Ministry of Transportation. This came after the airline had refused the directive twice, citing the Memorandum of Mutual Understanding it signed with the previous administration – the president had changed from Olusegun Obasanjo to Umaru Musa Yar’adua.
The idea to revive the country’s flag carrier was brought about by another change in administration. It was first mentioned as part of the ‘Presidential Aviation Roadmap’ when President Muhammadu Buhari came into power in 2015. The roadmap also included plans to set up a new Maintenance, Repair and Overhaul (MRO) facility, a nationwide leasing company, and the development of airports.
Talks to establish the leasing company have concretised recently, with a government-approved proposal from AJ Walters Leasing Limited (AJW Leasing) and Glovesly Pro-Project Limited to set it up. Likewise, the government has made some progress in developing airports, albeit painfully slow.
As for the new national carrier, there have been several delays in the timeline of its launch, and there now seems to be a race to bring its launch to completion before the current administration ends in May, 2023.
In November, 2021, Sirika announced the airline would launch in April 2022. However, the emergence of the Omicron variant of COVID-19 pushed it back. In early 2022, reports stated that the airline would see its first scheduled flight mid-year, however, there is yet to be any tangible marker of the airline’s operation.
The airline recently obtained its Air Transport Licence (ATL), but is yet to receive its Air Operator Certificate (AOC) which will actually allow it to start operating. There is currently no infrastructure on ground for the airline’s operation, but areas have been earmarked for the airline at the public international terminals in Abuja and Lagos, the former being the airline’s chosen headquarters.
Sirika said the government has spent about N400 million ($965,298) for the requirements to secure the AOC. He added that this was well within the 5% stake investment the government was to make and that ‘no further FGN funding will be provided above the five per cent share capital of the next national carrier of Nigeria, which was provided to launch Nigeria Air’.
The airline has reported assigned key roles such as managing director, project manager, chief financial officer, chief financial officer, and operations manager.
Ethiopian Airlines to the Rescue?
Ethiopian Airlines is not new to the business of partnering with other African airlines. In fact, the east African airline has adopted a “Vision 2025 multiple hub strategy” to forge strategic partnerships with many African countries, and establish itself as a pan-African business to beat out extra-continental competition.
In line with that, ET has a 49% stake of Malawi Airlines, 45% stake in Zambia Airways, formerly 49% stake in the now defunct Tchadia Airlines, and a 40% stake in Togo-based regional carrier ASKY Airlines and strategic partnership to make Lomé its West African hub – ET handles ASKY’s operational management and aircraft maintenance.
Another failed venture of ET’s was Ethiopian Mozambique Airlines which was founded in 2018, but ceased operations in May 2021 in the fallout from the COVID-19 pandemic.
Before the pandemic, the airline was also in talks with Equatorial Guinea, Guinea and Djibouti to establish more local airlines through joint ventures.
The airline recently took interest in Nigeria’s aviation sector. Former Managing Director of Ethiopian Airlines Tewolde GebreMariam once remarked about Nigeria’s need for a national carrier to maximise the benefits of its aviation sector and assume more influence in the global industry. For example, a national carrier would be in a better position to negotiate commercial agreements with airlines following Bilateral Air Service Agreement (BASA) negotiations.
In a publication by Nigeria’s Ministry of Aviation, titled ‘Status of the Road Map/PPP Projects’, the Ministry shed light on how the new national carrier would enable allow Nigeria enjoy some prime benefits, including BASA as well as the local employment opportunities that would be generated.
Nonetheless, the scepticism towards the partnership is understandable.
On the one hand, the partnership with ET could be the major push the airline needs to finally launch. On the other hand, ET – which is fully owned by the Ethiopian government – may just be looking to squash a rivalry before it even arises.
Under the management of ET, Nigeria could finally present a world class national carrier befitting of its stature. This would be a major boost of the nation’s image which could usher in more foreign investments and trade relationships.
During a courtesy visit to Minister Hadi Sirika at the Nigerian ICAO office in Canada on 1st October, Ethiopian Minister of Transport and Logistics Mrs Dagamawit Moges expressed hopes that the partnership would be beneficial to all involved, including the Nigerian population.
However, based on population alone, Nigeria is an even bigger market than Ethiopia, with a population of over 200 million compared to the latter’s population of about 115 million. ET taking on Nigeria could be a strategic move to eliminate its biggest competition.
By taking on Nigeria Air, ET stands to take advantage of the benefits Nigeria’s federal government will give its national carrier, and would likely overshadow Nigeria’s existing local carriers.
Some aviation experts fear that the federal government might be rushing into something that will not serve Nigeria in the long run, in a bid to hurriedly achieve the promised aviation roadmap before the upcoming change of administration.
On this, Amos Akpan, a senior executive of an aviation firm said, ‘I notice there is a determination by this government to start Nigeria Air operations before the next government comes in. Being insistent on starting operations within a set time is not bad, but let us avoid putting up something that will not be sustainable.
Some experts are even completely averse to the partnership. Secretary General of Aviation Round Table (ART) Captain John Ojikutu (rtd) clearly expressed this while rumour of ET’s involvement were still circulating.
‘First and foremost, I’m not in support of having any of the foreign airlines and a competitor with us on the BASA routes as our technical partners; the foreign airline interest in the partnerships comes before ours. Secondly, similar partnerships with the KLM and the SAA in the early 90s did not benefit us. We should therefore look for partnerships outside the competitors in the BASA routes in countries like Canada, Australia, etc. “However, if we must still look into the US and EU, let it not be among our competitors. We must also not forget that these competitors including the Ethiopian Airlines belong to the various major commercial aviation alliances which our new airline may not be given access into until the World Airline Organisation like IATA (the International Air Transport Association) find us worthy and that will not come soon,’ said Ojikutu.
Another industry expert suggested that ET buy over grandfather rights of Nigeria’s major routes for a grand sum of $700 million. He considered this reasonable as he had heard of African airlines being asked to pay between $75-120 million to operate major routes in smaller countries with much less passenger traffic.
It is also noteworthy that ET’s partnership with ASKY Airlines to make Lomé, Togo’s capital, its West African Hub could pose a direct conflict of interest to Nigeria. It is within reason to expect that Nigeria would be chosen over Togo, considering its significantly larger market.
The partnership may need to be reviewed in the future, but to actually get things up and running in the meantime, it is certainly beneficial to Nigeria.
Sources: Simple Flying, THISDAY, Premium Times