BusinessDay

Explainer: What new court snag could mean for Nigeria Air

The Federal High Court sitting in Lagos on Tuesday granted an order of interim injunction restraining the Federal Government from executing the proposed or draft agreement of the establishment of a national carrier between Ethiopian Airlines and Nigeria.

About eight domestic airlines sued the Federal Government, listing Nigerian Air; Ethiopian Airlines; Hadi Sirika, minister of aviation; and Abubakar Malami, attorney-general of the federation as defendants.

The airlines want the court to stop the national carrier deal and withdraw the Air Transport Licence already issued to Nigeria Air by the Federal Government/Nigerian Civil Aviation Authority.

They claimed that the firm that served as transaction adviser for the transaction was incorporated in March last year and alleged that it was linked to the aviation minister. They also claimed that the project was done without involving the airlines and key aviation stakeholders.

But the court, in granting the ex parte order, also ruled that an order of accelerated hearing of this suit has been granted.

However, the aviation minister said the Federal Government would go ahead with establishing a national carrier despite the subsisting suit challenging the project.

Sirika insisted that aviation stakeholders and unions had sufficient time to participate in the process, rather than engaging in a legal suit to stall the project.

He said he personally and individually engaged indigenous carriers, including Air Peace, Azman Air and Max Air, to participate in the project but they turned down the invitation because it was not formal.

The minister had earlier announced that Ethiopian Airlines would have 49 percent equity; Nigerian private investors (SAHCO, MRS and other institutional investors), 46 percent; and the Federal Government, five percent.

The choice of Ethiopian Airlines and the equity percentages elicited criticism, as many said these would pose an existential threat to the domestic carriers and the entire aviation sector.

Some stakeholders alleged that Ethiopia Airlines was putting nothing or very little on the table as foreign direct investment to own 49 percent of one of the world’s largest markets, Nigeria.
Read also: No court can stop Nigeria Air from flying – Sirika

There were also concerns that Nigeria would still be paying Ethiopian Airlines for aircraft leasing, engineering, crew and management.

Olumide Ohunayo, an aviation analyst, told BusinessDay that the court case on the national carrier would make any investor running into a last-minute deal to have a rethink and make sure all necessary processes are in place so they will not get their hands soiled in the nearest future.

He said: “Investors should realise that this has become a court case, and there is a need to put a hold on it and ensure they don’t lose their investments. Ethiopian Airlines should look beyond just investing in the national carrier and begin to look at the effects on other players in the industry.

“They cannot operate the airline alone. The airline is not a business in isolation. The court case has shown that there are some issues in the industry and Ethiopian Airlines should not think they will be protected by the minister.”

Ohunayo advised the minister to suspend the process and see what can be done so that Nigeria would benefit from the project.

“The national carrier project now looks like Nigeria is a subsidiary to Ethiopia Airlines, which already has about four multiple entries into the country. He needs to listen to all parties. Nigerians do not want to be a subsidiary but a partner airline that will benefit from the Single African Air Transport Market,” he added.

Ajibola Dalley, an aviation lawyer and senior advocate of Nigeria, said once Justice A Lewis-Allagoa of the Federal High Court granted the order to maintain the status quo ante bellum, no one has the right to do otherwise until the said order is reversed or varied by the court.

Dalley said therefore unless the respondents seek to break the law, they will be well advised to heed the order or risk facing the wrath of the judicial system.

He however noted that if the suit is fast-tracked and the matter is dealt with timeously and assuming the process was legal and transparent, the transaction will not fail.

According to John Ojikutu, a member of Aviation Round Table and chief executive of Centurion Securities, the court saga would prolong the start of Nigeria Air and may keep it on temporary or permanent hold.

“I had advised against the national carrier when in 2018 it was clear that those in the management of the project were bent on the partnership with our competitors on the Bilateral Air Service Agreement routes,” Ojikutu said.

Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School, said the court order would delay the national carrier because the Nigerian courts have to be respected as it is the duty of the courts to interpret the law of the land, and where there is an order of the court, it must be respected.

Mshelia said he expects the ministry, led by the minister, to respect the order, respond to the arguments, take a date and go and argue their position in court, in respect of the order.

He said if their position is superior, then the court will make further pronouncements.

“I have read an article attributed to the minister saying no court order will deter the take-off. But I am still confident that this order has come to stay. If we are used to flouting court orders, Ethiopian Airlines, being a foreign entity, will respect the law of our land. Besides, the fact that they understand the consequences in the future, they are an entity that respects procedures to grow the strength they have now,” he said.

Sindy Foster, principal managing partner at Avaero Capital Partners, said it is clear the minister will not willingly “step it down”, and that necessitated the court action.

Foster said one of the reasons no attempt was made to resolve the underlying issues is that if they had been resolved, it would have reduced the justification for a national carrier.

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