BusinessDay
NigeriaDecides2023

Explainer: Implications of having Ethiopian Airlines as core investor in Nigeria Air

Last week, the federal government, through Hadi Sirika, minister for aviation, announced Ethiopian Airlines as a core investor for the proposed national carrier, Nigeria Air, following a successful bid.

Sirika said Ethiopian Airlines will have 49 percent equity while Nigerian private investors (SAHCO, MRS and other institutional investors), 46 percent; and the Federal Government, five percent.

However, the choice of Ethiopian Airlines and the equity percentages have since elicited various reactions as some think the largest African carrier would provide the back on which Nigeria’s national carrier can thrive to connect various countries across the world. Others think the partnership would lead to an unhealthy competition between domestic carriers and the national carrier.

Gabriel Olowo, veteran aviation professional, said it is especially advantageous for Air Nigeria to partner with Ethiopia for simple purposes of Code Share Agreement and Blocked Seats Agreements outside the airline’s intended direct services.

According to him, one of the merits of Ethiopian Airlines’ partnership is that cooperation and collaboration will more than outweigh that of competition, provided the management is on top of its game.

He said: “Nigeria Airways, in the past, operated to many countries (not directly) but by commercial agreements. That is not all; interlining and global come with ease, given this partnership rather than the airline struggling on its own for relevance and partnership for route expansion and penetration purposes.

“Robust maintenance facility of Ethiopian Airlines and its varied fleet will be very helpful to the young airline. Manpower training and personnel exchanges would be another benefit.”

According to him, Ethiopia as an African partner is inward looking and it’s very good for the implementation of Single African Air Transport Market under African Continent Free Trade Agreement.

He, however, noted that the only caveat which has been printed repeatedly is that the five percent government ownership may not be necessary after all, since the government is midwifing a totally privately owned airline.

“It is also expected that the carrier is not treated as a ‘more flag carrier’ than all others already flying the flag such as Air Peace and one time Arik,” he added.

However, John Ojikutu, a member of Aviation Round Table and chief executive of Centurion Securities, told BusinessDay that he is not in support of having any of the foreign airlines and a competitor with Nigeria on the Bilateral Air Service Agreement Routes as its technical partners. “The foreign airline interest in the partnerships comes before ours.”

Ojikutu said similar partnerships with KLM and South African Airways in the early 90s did not benefit Nigeria.

He said: “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 United States and European Union, 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 organisations like the International Air Transport Association find Nigeria worthy, and that will not come soon.

“Ethiopian Airlines might be the leading carrier in the continent; do other countries in the continent provide the airline the same latitude as we do here or do their environments allow what we chose to turn our eyes away from?”

Read also: Nigeria Air: FG announces Ethiopian Airlines as preferred bidder

BusinessDay’s findings show that Ethiopia Airlines’ stake in Asky Airlines is 40 percent; Congo Air 49 percent; Guinean Airlines 49 percent; Malawian Airlines 49 percent; Mozambique Airlines, 99 percent; Tchadia Airlines, 49 percent; and Zambia Airways, 45 percent.

Olumide Ohunayo, an aviation analyst, told BusinessDay that observations so far had not made him have confidence in the new national carrier, as reports kept changing every day.

He said: “It started with the aircraft being wet leased, now it has changed to dry lease after so much criticism. The technical partners have not put a dime on the proposed national carrier. They said they would rather see a working company before they can invest.

“How sustainable is ET’s partnership with other airlines? Almost all the other airlines are just glorified domestic carriers that support the ET hub, the exception is Asky and it has taken Asky 12 years to have 12 aircraft. Considering that we are going to be competing in the same SAATM region, let there be a win-win situation.

“I am not too happy with the word national carrier. I think we have formed another airline on the Nigerian scene. This is like turning Ethiopian airlines to a domestic carrier. Right now, they need to change their strategies to be sure it serves the interest of the people.”

This is not the first time the Nigerian government is floating a private sector-led airline. Various attempts by past governments to set up national carriers failed over power play, government intervention, lack of management and unhealthy competition, among others.

The proposed national carriers and the ones that have gone into extinction include Nigerian Airways, Air Nigeria, NewCo, Nigerian Global, Nigerian Eagle, Virgin Nigeria, Air Nigeria, Nigerian Eagle and Nigeria One.

In 2012, Richard Branson, chairman of Virgin Atlantic, said: “We have Virgin’s ill-fated footsteps by setting up a new airline in Africa in conjunction with the Nigerian government. The detail of the doomed attempts to crack the Nigerian market in the 2000s is better imagined. We put together a very good airline-the first airline in West Africa that was ever IOSA/IATA operational safety audit accredited but unfortunately it got tied down to the politics of the country. We led the airlines for 11 years.

“We fought a daily battle against government agents who wanted to daily make fortune from us, politicians who saw the government 49 percent as a meal to seek for all kinds of favour, watchdogs (regulatory body) that didn’t know what to do and persistently asking for bribes at any point.”

Branson disclosed that N3 billion was realised for the federal government of Nigeria during the joint venture, adding that the government did not bring anything to the table except “dubious debts” by the previous carrier, Nigeria Airways.

He regretted that the joint venture should have been the biggest African carrier by now if the partnership was allowed to grow, but the politicians killed it.

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