Why Nigeria Airways Went Down


Nigeria_Airways_(5N-ANC),_Dublin,_February_1993_(03)While the news of establishing a new national carrier sounds cheery, a re-visit to the causes of the demise of Nigeria’s once enviable national carrier, Nigeria Airways, is inevitable to avoid issues that even now, appear confronting the planned national carrier. SAMSON ECHENIM writes

The Nigeria Airways came into being on August 23, 1958 to succeed the folded West African Airways Corporation (WAAC). Initially, the carrier was a tripartite entity in which the Nigerian government was the major shareholder with 51 per cent, while Elder Dempster Lines and BOAC held the balance of 32.5 per cent and 16.5 per cent respectively. The airline made its flight on October 1, 1958 with a BOAC Stratocruiser operated on behalf of the new airline linking London with Lagos.

Suffice to say that the airline had a great time, reaching its heydays in the 1980s and spreading flights across the African region, Europe and America. Nigeria Airways had 8,500 in its workforce and by 1986, its fleet had reached 30 aircraft.

However, by mid-1980 through the early 1990s, the carrier had accumulated significant debts that outstripped its revenues, while 1,000 jobs had been cut by late 1986. A federal government order later led to the airline reducing the number of employees and discontinuing unprofitable routes.

With the airline’s operations concentrated at Murtala Muhammed International Airport, Lagos, Nigeria Airways was managed by a number of foreign companies including British Airways, KLM and South African Airways. It had its heyday in the early 1980s, just after a KLM team’s two-year-management period, with its fleet comprising about 30 aircraft.

Plagued by mismanagement, corruption and over-staffing, at the time of closure, the airline had debts of more than US$60 million ($76,921,129 in 2015 value), a poor safety record, and its operative fleet comprised a single aircraft flying domestic routes as well as two leased aircraft operating the international network. The carrier ceased operations in 2003.

In a bid to re-establish another national carrier more recently, the federal government later came to an agreement with Virgin Atlantic Airways to found Virgin Nigeria Airways.

However, the deal failed after Mr Richard Branson, British investor who had acquired 49 per cent of the airline’s stake pulled out due to alleged government overbearance and regulations that were deemed too strict by the foreign investor.

On June 2, 2010, following the acquisition of a majority share in the airline by Jimoh Ibrahim, the new chairman announced that the airline had undergone a further name change to Air Nigeria Development Limited, branded as Air Nigeria.

On June 13, 2012, the carrier was grounded by regulators for safety issues, having been battling with personnel problems.

 

Where Nigerian Airways got it wrong

According to experts, the Nigeria Airways died due to myriads of issues bothering on ownership structure, corruption and poor management.

A former employee of the defunct Nigeria Airways, Mr Taiwo Adenekan, who is the managing consultant at PDT Consulting Limited, said 100 per cent ownership by government brought about undue instructions and influences ranging from appointment of 15 chief executive officers in 10 years. “So, there was indiscriminate use of the aircraft for personnel and government officials use without paying. Because it was a government company too, management was forcing the airline to operate non-profitable routes, with requests for tickets for family members, which were never paid for.

“Also, inflated aircraft spare parts, lack of funding and subventions, granting foreign airlines additional frequencies without protecting the interest of the national carrier and lack of patronage by the government are visible issues that killed Nigeria Airways,” he noted.

Adenekan also identified government’s refusal to enact the Fly Nigeria Act, which was intended to protect the national carrier as a huge setback for the defunct Nigeria Airways.

He also said recent plans to re-establish a national airline failed because there was concrete plans for its success from the beginning of such initiatives – the Virgin Nigeria and Air Nigeria deals.

“The initiatives died on arrival. It was a scam from government officials because it involved selling Nigeria’s Bilateral Aviation Safety Agreement (BASA) to Virgin Atlantic at unreasonable terms and conditions, enabling Virgin to operate local, regional and international flights from MMIA at the disadvantage of domestic carriers,” he said.

According to him, Air Nigeria also failed because of ownership structure.

“The new owners were not competent to ascertain the business of running an airline and were not prepared to take the risks involved, plus it was a bigger scam from the main promoter, which led to its eventual failure,” he observed.

 

Establishing the new national carrier

Experts are of the opinion that since government is not in the business of doing business, its stake in the planned national carrier should be minimal, while the inclusion of foreign investors should also be played down.

Adeneka says government has no business in airline business, suggesting a public-private partnership.

In fact, Engineer Sheri Kyari of the Centre for Aviation Safety and Research recommended that the government should own only 10 per cent in the planned national carrier, while a maximum of 10 per cent should also go to a foreign investor. Involving a foreign investor at this level will largely be so, just for his competence and wealth of experience in the management of the planned national carrier.

President of Skyjet Aviation Services, Dr Kashim Shettima called for caution, saying establishing a new national airline may not be in the interest of the country, especially as the government world-over is fast withdrawing from businesses, because governments have not shown to be good business managers.

He said, “In my own opinion, I think the president needs to be properly briefed with what the current situation is. He needs to hear the truth and nothing but the truth. There should be a stakeholders’ meeting with the president where they he will meet face to face with the industry players such as unions, airline operators of Nigeria and so on.

“Does the president know the cost of running an airline now? Does he know that a national carrier will have to be given subsidy from time to time? Why do we have to re-invent what happened to Nigeria Airways? The president needs to have the forensic audit of why Nigeria airlines are debt-ridden before venturing into the business. I hope it is going to be business because aviation is nothing but a business. This might be a nightmare. In as much as this is a good dream, sentiment must not replace reality like what we have presently in Nigerian aviation sector.”

Also, another industry investor said the government needs to first correct “the many anomalies” in the sector, which according to him have made investment in the sector less attractive and without profits.

He said, “A lot is to be done in this direction. Investing in an airline in Nigeria is a huge risk. I think this is one thing that many people already know. Yes, the government can fund the operations of the national carrier but it should be done profitably.

“If not, then where’s the justification for running the airline. Government should have its priorities and pursue them closely. The solution to the problems in the sector is a thing of making and implementing the right policies and then the industry would thrive.”

However, others believe that where it is done well, the plan is in the right direction.

The National Association of Aircraft Pilots and Engineers (NAAPE) in reaction to the presidential directive to establish a national carrier said, existence of a national carrier it would lead to rapid growth of the industry, create jobs and boost the contribution of aviation to the nation’s gross domestic products (GDP).

Currently, aviation in Nigeria contributes only 0.4 per cent to the country’s GDP. This is compared to 25 per cent and about 40 per cent, which the industry contributes to the South African and Kenyan economies respectively.

Going back memory lane, the NAAPE recalled a nostalgic extinction of the Nigerian Airways, condemning its liquidation.

The association lamented what it described as “regressive effect on the growth of the industry.” The air pilots and engineers also noted that if the national airline was not liquidated, Nigeria would not only have established modern maintenance, repair and overhaul (MRO) facility but would have been able to carry out D-checks on aircraft engines.

“It is, therefore, with enthusiastic that one receives the news of the directive of President Buhari to the Ministry of Aviation to expedite action on the establishment of a new national carrier which can now spearhead Nigeria’s deserved quest for global reckoning in aviation,” NAAPE stated in a statement signed by its president, Issac Balami.

It however warned against involving foreign investors in the plan. “It is however important to sound this note of caution. Any idea of engaging a foreign airline, or foreign MRO as technical partner should be banished. This is because, no sane business person will encourage a viable competitor. Nor will such partners agree to terms that will grant advantage to the new carrier over their already vested interests in their home airlines.

“It is sincerely hoped that the Ministry of Aviation will be open and transparent in the process of setting up the new national carrier and would allow participation by genuine industry stakeholders,” said NAAPE.

The association expects the planned national carrier to reach for a mega carrier status which can compete at the global stage, in addition to a full scale MRO being part of the deal for the new carrier.

 

Fixing the aviation sector

Another aviation expert and president, Aviation Safety Round Table Initiative (ART) Elder Gbenga Olowo observed that huge investment in the aviation sector by private investors usually collapse after a short time, an indication that government must exercise due diligence in its plan to re-establish a national carrier.

Speaking at the 2015 Breakfast Meeting of Aviation Round Table held recently in Lagos, with the theme, “Ownership, Funding and Sustainability of Nigerian Airlines – A Perennial Challenge,” the president observed that airline business in some cases cave in as soon as it is introduced.

“Airline operators in Nigeria are crying about the problems they are facing in the sector. You will see that the mortality rate of Nigerian airlines is very high. Some die after five years, 10 years, maximum 15 years. Some, as the airline is born, it’s gone. It is not the same outside Nigeria. So, the question to us is, what is the objective of the government for aviation?” he queried.

He said government should make a definitive statement on how much it wants aviation to contribute to the GDP and activate plans to achieve it, instead of pursuing a national carrier that may not live long again.

“Government should make a pronouncement on what the government wants. Do they want five per cent or 10 per cent contribution from Aviation, and how is that going to happen?

“Government’s proposal for a national carrier is commendable but I suggest that it should be well midwifed to make it sustainable.

“If that is going to be another airline, and you have Arik Air as number two and all the other ones with two or three airplane, to come under one umbrella midwifed by NCAA, then that is number three, then Nigeria will have two to three strong players to be able to reciprocate all the BASA rights. One national carrier cannot reciprocate all the BASA rights,” he said.

“We have about 57 rights for now. One carrier cannot do it but when we have two or three airlines and government makes the environment easy for all of them, give all of them a backing because on the tail of these airplane will be a flag – green white green. If the airplanes will be registered in Nigeria, flying Nigeria flag, then Nigeria will be able to boast of three flag carriers. I recognise any one coming as a flag carrier from my own professional look because already, someone is already flying the flag to London, Johannesburg, and to some other parts of the world. Since one is flying already, the one that is coming will fly the flag as well.

“We don’t want to see a new airline with a monopolistic tendency. We want to see that players play on the same level playing field with all others. We don’t want to see discriminatory offer. What one airline gets should be extended to others. If one airline is able to get fuel subsidy, other airlines should get too. If one airline gets the backing of any issue out there while negotiating the BASA rights, all the other airlines should be able to enjoy the same. Then you will be putting three smart players on the field and then it will be easy to deliver. If you want to see each of the players parading over hundred airplanes, then that will be a kind gesture,” he stated. -Leadership


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