No to new public 'National Carrier' – Hallmark

By The Citizen

The word coming out from government quarters indicate that the Jonathan administration is bent on establishing a new, government-owned national carrier, with hints that work may already have begun in that regard.

This newspaper queries the rationale and benefit of this policy reversal in respect of the proposed government's involvement in commercial airline business at a time that the government is determinedly exiting from the running of sundry businesses. Through its privatization programme, the government has sold off its stake in commercial ventures that the private sector does a better job at. So we ask again: what is the point in the reintroduction of the national carrier?

From all objective references, the National Carrier status refers to an old and odd practice in which nations had historically set up national aviation companies which were given preferential treatment over and above competing aviation firms of other states and the private sector.

Given the nature and history of the economic development, the essential reason for governments going into certain businesses, especially in newly independent states, was the dearth of entrepreneurial capacity and the need to help jumpstart the economy for growth and development. That was the compelling case for the establishment of a state-owned and operated national carrier back then. But, with the increasing maturity of the business class, private firms have proven to better managers of commercial ventures than the government.

The justification for a national carrier then was that in a world that favoured the use of bilateral air services agreements (BASA) and 'Open Skies' policy agreements, countries with well developed and efficiently managed international airlines as national carriers were better positioned to tap into the lucrative aviation revenue. It was with that reckoning that the Nigeria Airways Company was established and sustained until its demise a few years ago.

In the absence of a Nigerian national carrier since 2007, the country has had to designate one or two privately-owned Nigerian airlines as 'national carriers'. Unfortunately, the airlines failed to maximize the opportunity from such designations

Indeed, were indigenous airlines the only poor performers in the nation's international aviation business landscape, Hallmark would have given the thumbs down to their continued consideration for the role of national carrier. But, our investigations suggest that the problems indeed go beyond the issue poor domestic capacity.

Regulate, facilitate but don't run
Aviation is a capital-intensive business that thrives largely on the structured use of 'other people's money'' (OPM) and there is the need to address a specialized funding regime for the sector. And given the continued structural weaknesses in the Nigerian economy, it is indeed a moot point that almost no airline can survive, thrive and excel in our environment, without a financial support arrangement, let alone going to play on the international turf where various experienced and well-heeled sharks compete in a market that is largely characterised by low margins, high operating costs and fast-changing technological and managerial dynamics.

Again, our experience with the Nigeria Airways and scores of other state-funded businesses show that public sector corporations continue to lack the basic capacity and impetus to drive basic business processes in a most wholesome manner.

While many reasons have been given for the eclipse of the Nigeria Airways and indeed the failure of several other efforts since then to give the nation a semblance of a rejuvenated national carrier, the fact of the matter really is that there is no justifiable reason to promote a state-funded national carrier at this stage of our development.

We therefore advocate an alternative policy of encouraging mergers and acquisitions in the sector that would result in large aviation companies springing up to fill the vacuum left by the demise of Nigeria Airways. Government should create enabling condition to attract private investments in the sector. It should provide incentives to encourage investors to set up a world class hanger for local and regional checks and maintenance of aircraft.

Again, this reclining to old ways also stands as a contradiction in practice and terms. A few weeks ago, President Jonathan was at the head of a high-powered government delegation that went to London to canvass the case for increased foreign investments in Nigeria.

While this newspaper does not essentially have any problems with trips of this nature, it is also aware that there is even a bigger and more fundamental variable that potential investors, local and foreign, give serious heed to. And this namely is the policy environment within which they are being invited to play.

Finally, given our experience with safety in the sky and the airports, we strongly advise our public authorities to focus on their primary responsibility of being regulators and not economic players in the aviation sector. For a country, the spectre of air mishaps that visits the country every now and again clearly point to the need to ratchet up regulation and monitoring. The authorities should busy themselves in the two areas and not anywhere else.

That is imperative if Nigeria is to reverse the dubious distinction of having the most failed airlines in Africa, such as ADC, Albarka, Okada, Oriental, Concorde, Bellview, Sosoliso, Hold Trade. The truth of the matter is that this country has really seen many airlines come and go. And starting a potentially dead-on-arrival new national carrier is clearly not the way to go now.