Stopping Oduah's national airline obsession – Punch

By The Citizen

Ever since she was appointed Minister of Aviation two years ago, Stella Oduah has been obsessed with floating a new national airline. In this single-minded venture, she has refused to be tutored by experience or discouraged by the wide berth major global players in the aviation business have been giving the hoary idea. She obviously has President Goodluck Jonathan on her side and both are determined to commit the Nigerian taxpayer to a commercial enterprise that is better left to private investors.

We have said so before; this is a bad idea, a misplaced priority. It is likely to become another ready conduit for corrupt politicians. The interests of the Nigerian people will be better served by radically reforming the aviation sector and its infrastructure to attract local and international investors. The fundamental problem of the sector is the unfavourable operating environment, hallmarked by dilapidated airports and poor or non-existent navigation aids, lax regulation, low credit and corruption. These are compounded by poor management at the regulatory agencies and the bureaucracy, frequent changes in leadership at the agencies and policy somersaults.

Corruption and mismanagement killed the Nigeria Airways, the state-owned flag carrier that was finally liquidated 10 years ago after many years of losses and scandals. Corruption, official chicanery and sudden policy changes similarly killed off alliances with several foreign airlines.  Corruption has now become even more widespread and endemic.

In her desperation, Oduah recently led a team of officials to a meeting with the Central Bank of Nigeria Governor, Lamido Sanusi, seeking his help to raise $500 million for the airline project, according to a report. The CBN should take a leaf out of the book of Lufthansa and Air France, two global carriers that have wisely declined to join as technical partners. The unpalatable experiences of KLM, the Dutch flag carrier, and Virgin Atlantic of the United Kingdom in a short-lived technical partner arrangement with the defunct Nigerian flag carrier are well-known. The CBN should wash its hands of the deal and leave Oduah to her own devices.

The ministry is said to be wooing Ryanair of Ireland as the technical partner for the proposed airline and wants the CBN to help raise the $500 million it targets from banks as take-off fund. Those promoting this project may have a hidden agenda. The Nigerian government has not run any commercial venture successfully and the nation's path is strewn with the carcasses of numerous State-Owned Enterprises.

Everything - from reorganisation, hiring external managers and technical partnership to joint ventures - was tried in vain attempts to save Nigeria Airways. The final straw was when the International Finance Corporation, the private sector affiliate of the World Bank, walked out in exasperation at our corrupt ways as privatisation advisers, finally prompting its liquidation.

Oduah's bogus project has been exposed for its inconsistency. When she first came with the new national carrier idea in 2011, she promised to deliver one by 2012 that would be publicly owned with equity participation by the government.  By 2012, she and Jonathan were speaking of an airline 'with substantial public ownership' and bandying figures of thousands of jobs to be created and a fanciful vision of dozens of aircraft, routes and support industries. It is a pipe dream. No such venture can succeed until we clear up the mess in the operating environment. The government has not demonstrated any capacity to manage SOEs profitably or better than its predecessors.

Jonathan and Oduah should get their priorities right. Improving safety, having modern, well-run airports, reducing heavy taxes and levies and partnering investors to build infrastructure such as maintenance hangars are the first steps urgently needed to rescue the troubled aviation sector. The way to go is to encourage local and foreign operators. The Nigerian government will profit by putting in place the appropriate regulations to liberalise the industry. The world has moved on to the point that a national flag carrier need not be state-owned. British Airways, Iberia and Air France have been privatised by the governments of Britain, Spain and France respectively. The problems in the sector and corruption have ensured that intervention funds from the government and the CBN to help indigenous airlines have vanished into the pockets of dodgy operators.

We must end the fixation on helping indigenous operators by giving them dollops of public funds. Aviation is a business, run on the principles of profit and free entry and free exit. An incompetent operator will have to die and give way to the strong. The resilient ones need not be wholly indigenous carriers. Instead of the government seeking partners for a doomed national airline project, it should thoroughly overhaul the Nigerian Airspace Management Authority and the Nigerian Civil Aviation Authority for efficiency. These agencies are believed to be inefficient and steeped in corruption, just as the Federal Airports Authority of Nigeria, which ineptly runs 22 airports with only two - Lagos and Abuja - accounting for 90 per cent of its earnings in 2011.

The government should grant concessions to international operators to run its airports and close or sell the unviable ones. It should drop all notions of floating an airline. There is no use comparing us to countries like Ethiopia, United Arab Emirates and China that run successful SOEs. We have never successfully run any state enterprise for an appreciable length of time. Our indiscipline, nepotism and corruption have not been tamed; in fact, the anti-corruption war is floundering and our rating on the global Corruption Perception Index remains stubbornly high.

Success lies in allowing private capital to lead while government sets the rules. Going to borrow from China to buy 30 planes for local airlines, one other misplaced initiative, is altogether wrong. The sector needs liberalisation and funding support through development banks, not a return to wasteful state capitalism and subsidies. Oduah's ill-conceived project will not work