FG clears air on controversies over national carrier | Nigeria News Today. Your online Nigerian Newspaper f

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Nigerian Civil Aviation Authority (NCAA), on Monday offered clarification on the controversies trailing the national carrier- Nigeria Air saying the airline is currently incorporated as a wholly government company with the Corporate Affairs Commission using nominal directors who are directors of the Ministry of Aviation.


A souce close to the NCAA, who pleaded not to be named said the certificate of incorporation of the airline will be made public very soon on conclusion of the public private partnership procurement process; which will spelt out when full equity structure pre financial close is finalized.

The official said Nigeria Air Limited as a legal entity already has a domain name: www.flynigeriaair.ng, which has been reserved and will be made active very soon as part of the project evaluation and marketing process.

The NCAA official confided that the ownership of the national carrier in terms of international convention must be beneficial to majority of Nigerians with the accruing privileges to national carriers.

As part of efforts to make airlines viable in Nigeria, the ministry, he said is making moves to have the National Assembly pass a fly Nigeria act. This act will require that anybody travelling on a ticket bought with public funds must travel on a Nigerian carrier unless the route is not served by a Nigerian carrier. However, with your private funds you can do as you like. Many countries including America has such as Act.

He said the current logo of the national carrier is a prerequisite for the issuance of Air Transport License and Air Operators Certficate by the NCAA.

He said: “The logo is requirements for an ATL and AOC required for NCAA to license an airline. In any case the name and logo can be amended it the strategic equity partners feel it’s not right for the business. We must recall that the airline name and logo was the result of an open national competition. However, this airline line is going to represents our Nation, the Name, logo and color should be in line with what was done with the public.”

He also spared a thought for the structure of the airline saying: “At start up government will own majority equity in Nigeria Air Limited Joint Venture Company. A Joint Venture Company that would be very similar to Nigeria LNG Limited. Nigeria LNG Limited is a huge JV success that is private sector managed so will Nigeria Air Limited. After one year of operations, government will through an IPO divest her equity for purchase by Nigerians subject to approval of the Securities and Exchange Commission. Government will then retain only five per cent equity. The rest of 95 per cent equity of Nigeria Air Limited will then be owned by the strategic equity investor and the general public.

“Majority ownership must however remain with Nigerians so that the national carrier can benefit from BASA and other bilateral agreements which require local beneficial ownership as a condition precedent. Management of the national carrier will be concessional to the strategic equity investor with no step in rights and management control by government. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO.”

He said the project is not shrouded in any secrecy affirming “There is no secrecy. The entire process is guided by the infrastructure concession regulatory commission guidelines/regulations.

Because it’s a PPP, it has three stages – the project development stage, procurement stage and implementation stage. The project development stage was just concluded with the approval of the Outline Business Case, which the ICRC issued a certificate of compliance. Once the process gets to the PPP procurement stage, there will be an RFQ, Information Memorandum and RFP bidding process which will be made public, competitive and transparent. It is only after the PPP procurement process that the strategic equity investor will be known. At that stage the JV partners will be government and the strategic equity partner. Government’s equity share held in trust for Nigerians will be devolved to Nigerians via an IPO. The government will retain only 5% equity, the list of shareholders then will be available to SEC and the Nigerian Stock Exchange. At that point Nigeria Air Ltd becomes a public company subject to SEC, NSE and relevant CAMA rules for public companies. All PPP procurement and ownership moves will be made public. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO.”

He clarified that government is not entirely funding the airline.

His words “The Government is not funding the entire project. It’s just providing startup capital in the form of an Upfront Grant/Viability Gap Funding. Once the strategic equity investor is in place, they will be expected to build on the initial investment made.

The OBC made it clear that the strategic equity investors will not start the national carrier; government has to start it in order to attract credible investors.

$8m represents startup capital for offices required for takeoff. But $300m is the entire airline cash flow funding requirements (aircraft, operations and working capital) for three years (2018, 2019 and 2020).

“This funding can be in the form of equity or debt. The financial model estimates cash flow requirements as follows 2018 ($55m – $8 million is included here), 2019 ($100m) and 2020 ($145m). In order to ensure take of the airline in 2018 government will provide US $55 Million upfront grant/viability gap funding to finance startup capital and pay commitment fees for aircraft to be leased for initial operations and deposit for new aircrafts whose delivery will begin in 2021.

“The remaining financial injection by government will be determined by the quantum of equity that the strategic equity partner will bring as a result of the PPP competitive bidding process. This explanation clearly debunks the claim in the social media that government is paying $300 million for a five per cent equity share. Furthermore, with ongoing discussions the cash flow requirement may be lower than $300 million; furthermore, the cash flow estimates contains a 20 per cent buffer that is put in on the assumption that the airline may suffer an operating loss in year 1 due to competition and needto build a brand. As mentioned earlier governments contribution to equity will be in the form of an upfront grant/VGF. Government’s upfront grant/VGF contribution to equity will be funded through either a supplementary budgetary allocation or development financial institutions like AFREXIM bank, AFBD, ISDB etc, who have indicated keen interest in funding the national carrier project because of its bankability and profitability profile.”

On how government intends to procure the aircraft, the NCAA official said: ” As you may be aware it’s almost impossible for you to pay for and get a new aircraft immediately because it is not an off the shelf item like indomie noodles. However, as part of discussions with major Aircraft Manufacturers, the Government will pay deposits for brand new aircrafts and the manufacturers will support Nigeria Air in getting very good dry lease aircrafts coming directly from c checks and certified by the original manufacturers. These aircraft lease period will be for an initial period of fiver years with an early termination option after 4 years. By the time the new aircraft are ready, they will be replacing the leased aircrafts. Till all the aircraft are owned by the airline. This is how Emirates Airlines started with two leased aircraft from Pakistan Airlines until it was able to buy her own aircrafts. According to the manufacturers, the new aircrafts will start coming through from 2021. YOU MIGHT ENJOY READING

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  1. With this clarification from the Nigerian Civil Aviation Authority I feel confident that the Nigeria Air may become a reality. The clarification is strong enough to convince would be investors both internationally and locally. A clarification like this would have helped the situation before rushing to London to advertise what is not physically on the ground. My hope and prayer is that when the shares are being allocated, equity will prevail. If the allocations were done legitimately, the Airline will benefit from it. We are all aware of money bags around with cheap money made through corruption, the Airline may not need such funds. Cheap funds, in most cases, bring in undue manipulation of progress. The authority must be vigilant enough to identify would be culprits. Nigeria Air must succeed through strategic planning and operation.

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