• Thursday, June 13, 2024
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Nigeria Air: FG announces Ethiopian Airlines as preferred bidder

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

Ethiopian Airlines has emerged preferred bidder for Nigeria Air, as core investor, following a successful bid. The airline won the bid with a consortium and all together the consortium will have 95 controlling shares.

Ethiopian Airlines will have 49 percent equity while the other members of the consortium will have 46 percent. The Federal Government will own the remaining five percent equity.

The federal government stated that the consortium has been subject to a due diligence process, after which the contract will be negotiated between the consortium and the FGN, leading to a Full Business Case, which will be expected to be approved Federal Executive Council (FEC). The federal government says it expects this process to take six to eight weeks.

In a report by Hadi Sirika, minister of aviation, titled: Status of the Nigeria Air and the PPP Bidding Process, he stated that the national carrier, Nigeria Air, is well on its way to being launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market.

The report stated that Nigeria Air will launch with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between these two major Nigerian Airports. Other domestic destination will follow thereafter, adding that the Request for Proposal (RFP) under the PPP act, governed by ICRC, is completed.

“An interim Executive Team of highly skilled Aviation Experts has been working since FEB 2022 to set up all the necessary regulatory and industry requirements to launch the National Carrier. All Executives have been approved by NCAA, the Air Transport License has been issued by NCAA, Nigeria Air (after having identified the first three aircraft) will now finalize all necessary Operation Manuals and then go through the inspection and approval process of NCAA.

Read also: Nigeria Air plans to take off amid fuel, forex crises

“The money spent for the launch of Nigeria Air, for all the requirements to establish an AOC and be admitted starting an airline operation, is well within the 5% capital investment of the Federal Government of Nigeria, that will be overall needed to establish the National Carrier initially for the AOC approval and everything else required by stringent national aviation regulations, as prescribed in the FEC approved Outline Business Case (OBC),” the report stated.

Sirika stated in the report that OBC is the milestone for the preferred Bidder Consortium and has been met by the submitted business plan of the preferred bidder. It is the overall share capital of around 300 Mio USD, provided by the preferred bidder that will launch Nigeria Air to its full size of 30 aircraft and international operation within the next two years.

He said no further FGN funding will be provided above the five percent share capital of the next national Carrier of Nigeria, which was provided to launch Nigeria Air.

On the background of the national carrier, the minister stated that the invitation to bid for the ownership of Nigeria Air under the PPP regulations of the Federal Government of Nigeria (FGN) and overseen by the Infrastructure Concession Regulatory Commission (ICRC) was published in the Economist and in several local Nigerian papers on 5th March 2022 (see Annex 1), with a deadline for the Request for Proposal (RFP) set for 10th May, 2022, later extended to 10th June, 2022, with another publication in the Nigerian local papers.

According to him, a data room for all the details of Nigeria Air, including the Outline Business Case (OBC) and the financial model, was established by the Transaction Advisor on 15th March 2022 and the dataroom is a reflection how transparent the PPP process and the RFP procedure were handled.

“A bidders conference was held online on 28th March, 2022 with over 100 participants. Over 60 parties requested access to the dataroom.

“On 10th June 2022 the Ministry received on time one closed bid by the Ethiopian Airline Consortium. Few others attempted to submit, but unfortunately could not meet the deadline. Since we did not collect the bids, we are not in a position to say who they are.

Read also: Nigeria Air to fly before end of Buhari’s tenure – ICRC

“The evaluation Team, 11 Experts from ICRC, FMFB&NP, FMA and the TA met on the 20/21st July 2022 and again on 1st August 2022.

“The Ethiopian Airline Consortium bid was formally opened in the presence of a representation of Ethiopian Airlines, checking that all envelopes were closed and sealed at that point, 11am on 20th July, starting with the Technical Bid. The Financial Bid was opened, again under the observation of the Ethiopian representative, on 21st July 2022. All 10 forms, as required by the RFP, were evaluated by the team. Unanimously, the assessment team cleared the Technical Bid, which had a total score of 89 percent out of 100,” the report further stated.