As 45-year-old Nigeria Airways slips into liquidation, the Nigerian government is in the process of setting up a new national carrier with majority private interest.
The government is hoping to attract interest from foreign carriers in an initial public offering (IPO) for the new carrier, named Nigerian Global.
Nigeria is believed to have invited British Airways, Lufthansa, Air France and KLM to send in proposals. The front runner, however, is South African Airways (SAA). While the appetite of the main European carriers for African investments is questionable, SAA has been searching for a west African base to complement its main hub in Johannesburg, covering southern Africa, and Dar es Salaam, catering for East Africa. SAA has a 49% holding in Dar es Salaam-based Air Tanzania.
Nigerian aviation sources say SAA is proposing to invest around $60 million in the new entity and bring in 16 aircraft to the new operation - consisting of Airbus A340-400s and Boeing 737s. It has also promised to take on 1,000 staff, rising to 2,000 by 2004. The Nigerian government would match SAA's 30% stake, with the remaining 40% coming from institutional and private investors.
SAA previously worked with Nigeria Airways on flights from Johannesburg to New York via Lagos, although the alliance lasted only a year before SAA severed the agreement in March 2002.
Meanwhile, Nigeria Airways, the beleaguered national carrier, is to be liquidated. This decision was reached in a meeting of the country's Council of Ministers last May, and the process has begun with the government's refusal to approve the renewal of the airline's fleet insurance premium for 2003-4 estimated at $904,000, and the grounding of the only serviceable aircraft, a Boeing 737-200.
Analysts believe that more than $200 million has been invested by the government in the airline in the past decade, without any tangible result. The five-year unaudited financial figures of Nigeria Airways are appalling. Government sources say the airline has a net deficit of $528 million and ought to have long since gone out of business.
According to the Nigerian government, the airline's performance has declined in the past 15 years. Passenger numbers have fallen from 2.1 million in 1985 to 10,000 in the first quarter of 2003. As of December 2001, the airline controlled only 6% of the domestic market and 1% of the international market.
With a payroll of 1,173, the airline has one of the highest, if not the highest, staff-to-aircraft ratio in the world. One of its major sources of revenue is charging royalties from European airlines that find routes to Nigeria attractive because of the high yield, and often request more frequencies from unused traffic rights belonging to Nigeria Airways. They can pay between $50 to $110 per passenger on each sector.
The government wants to make Lagos the main international hub in West Africa, and decided this could not happen with Nigeria Airways. "We believe that without a carrier which is going to be private sector-driven, we may not be able to have this dream of making Nigeria a hub," says Isa Yuguda, the new aviation minister.
The fortunes of Nigeria Airways nose-dived in the 1980s following the introduction of International Monetary Fund-driven economic policies. Other factors include corruption, government interference and managerial incompetence.
However, when the Obasanjo administration came to office in 1999, it set up the Bureau for Public Enterprises (BPE) to privatise public-owned companies, including the national carrier. The International Finance Corporation (IFC), an arm of the World Bank, was commissioned to undertake a study and advise the government.
A report was submitted in 2000 with three options: liquidation, management turnaround or a new company. The BPE picked the latter option, with the aim of maintaining a maximum government shareholding of 25%. The IFC pulled out over a year ago, complaining of the government's insincerity towards the project.
Source: Airline Business
