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Nigeria Air: An ill-advised venture

I suppose that part of his statement was calculated to re-assure the public with its brows all the way up at the news

The federal government has truly ill-advised itself to embark on a venture that has perhaps rhyme in politics but no reasons in contemporary conventional business wisdom. It is floating a new national airline fifteen years after inefficiency, mismanagement and corruption put an end to the first of such a wasteful venture called Nigeria Airways Limited. To be fair, at the time Nigeria Airways Limited was set up, only the federal government had the financial muscle to be a player in the industry.

The minister of state for aviation (now minister of aviation), Hadi Sirika, unveiled both the name and the logo for the new national carrier, Nigeria Air, a few days ago at the current Farnborough International Air Show in London. He said that the new airline would be private sector driven because the federal government would own only five per cent of the equity shares in the company and that the “government will not be involved in running or deciding who runs it.”

I suppose that part of his statement was calculated to re-assure the public with its brows all the way up at the news, that with the private sector in the driving seat and the government ensconced in the popular side of the business, it would be all business driven entirely by commercial interests. Private-partnership briefly beguiled public imagination early in this century. But it was only a dusting off of what had always been. It worked in some cases and proved a disaster in others. The gospel itself now seems to ring hollow.

It is said that if at first you do not succeed, try, try again. Nigeria Airways Limited rose from the ashes of the West African Airways Corporation floated by the British colonial authorities. It was a joint venture between the Nigerian government and two foreign companies – Elder Dempster and BOAC. The Nigerian government held the majority equity share of 51% while Elder Dempster and British Airways Overseas Corporation held 32% and 161/3% respectively. In 1961, the government bought out the other two partners and assumed 100% ownership. As you can see the federal government back then appreciated the wisdom of private/public partnership. So, what is new?

Nigeria Airway had everything going for it. Money was no problem. The government pumped money into it. And creditors supported it. It was for many years the only airline in the country. In its halcyon days in the 1980s, it had more aircraft in its fleet than any other airline on the continent. About 30 or 40. It had almost every aircraft make in the world in its fleet – Airbuses, DC, some 21 different series of Boeing, BAC, Fokker Friendship; the whole lot.

These treasures did not save it. It began to gradually abandon the sky. Someone then realised that its problem might have something to do with its logo – a flying elephant. Elephants do not fly. The eagle was summoned to the rescue as the appropriate logo of the airline. But the worm was steadily eating its way into the apple. Sometime in 1979, the federal military government brought in KLM to help our people run an efficient and profitable national carrier. Things went from bad to worse as soon as KLM left.

By 2003, it was clear to the federal government that it could not save the airline from going under. It had a $528,000,000 debt burden hanging on its neck. And only one serviceable Boeing 737-200 series in its sorely depleted fleet. And so, Richard Branson came in. And so he left and threw it to Jimoh Ibrahim. And so the airline became history.

The deregulation of the aviation industry in the eighties brought in a slew of investors in the industry. It was a lively industry ruined by poor regulation. Anyone who could put a bank loan together floated an airline, brought in one or two aircraft on wet lease and went into business. Some of those aircraft had passed their expiry dates. They were so poorly-maintained that soon they began to tumble disastrously down from the skies. I think the government woke up.

There is something amusingly courageous in the government decision not to allow the failure of Nigeria Airways Limited stop it from trying again at running a new national carrier. The problem is that it is a sentimental courage. The decision to float a national carrier can be faulted on several grounds.

We take two. One, it is neither necessary nor desirable that we have a national carrier. There is nothing particularly important about a national carrier. If there were, we know the countries that would be flying their national flags on their national carriers. Is there anything to suggest that Nigeria Air would fare better than Nigeria Airways just because the government would hold only five per cent of the shares? Do we have any reasons to believe that the factors that ruined Nigeria Airways Limited would no longer converge in Nigeria Air? What is likely to happen is that driven as this decision is by sentiment rather  than by hard-headed business sense, good money would go down with a decision that came from the heart. Disadvantage? The Nigerian state.

Two, a new national carrier is a backward march for the country. The days when federal and state governments had their fingers in every pie are long gone. The current conventional wisdom is to free the public sector from competing with the private sector in any shape or form. The privatisation policy introduced by the Babangida administration achieved this objective in that federal and state governments were forced to give up their ambition to compete and compete poorly with the private sector in their areas of core competence.

It is right and proper for the government to show interest in the success of the aviation industry. Its best bet is to support the private airlines to survive and turn a profit for their investors. Let us march forward, armed with the conventional wisdom to restrict government to setting policies and policing them in the industry to make it safe. (First published July 22, 2018 with the headline: Nigeria Air: before the applause).

Note to the repeat column: The government is going ahead with the new airline. It has released $250 million to it. Mark my words, Nigeria Air would turn out to be a total waste of public money. When it fails, no one would be held responsible for it.