FG clears air on controversies over national carrier

FG clears air on controversies over national carrier

- The controversies surrounding the national carrier has been reportedly cleared by the Nigerian Civil Aviation Authority

- The NCAA reportedly said at start up, government will own majority equity in Nigeria Air Limited Joint Venture Company

- It added that the national carrier already has a domain name

The Nigerian Civil Aviation Authority has addressed some of the concerns raised by Nigerians over the unveiling on the national carrier, Nigeria Air.

The Nation reports that an official of the NCAA, who pleaded anonymity, said the airline as a legal entity already has a domain name: www.flynigeriaair.ng, which has been reserved and will be made active very soon as part of the project evaluation and marketing process.

He added that the ministry is making moves to have the National Assembly pass a fly Nigeria act. This act will require that anybody travelling on a ticket bought with public funds must travel on a Nigerian carrier unless the route is not served by a Nigerian carrier.

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The official said: “The logo is requirements for an ATL and AOC required for NCAA to license an airline. In any case the name and logo can be amended it the strategic equity partners feel it’s not right for the business. We must recall that the airline name and logo was the result of an open national competition. However, this airline line is going to represents our Nation, the Name, logo and color should be in line with what was done with the public.

“At start up government will own majority equity in Nigeria Air Limited Joint Venture Company. A Joint Venture Company that would be very similar to Nigeria LNG Limited. Nigeria LNG Limited is a huge JV success that is private sector managed so will Nigeria Air Limited. After one year of operations, government will through an IPO divest her equity for purchase by Nigerians subject to approval of the Securities and Exchange Commission. Government will then retain only five per cent equity. The rest of 95 per cent equity of Nigeria Air Limited will then be owned by the strategic equity investor and the general public.

“Majority ownership must however remain with Nigerians so that the national carrier can benefit from BASA and other bilateral agreements which require local beneficial ownership as a condition precedent. Management of the national carrier will be concessional to the strategic equity investor with no step in rights and management control by government. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO.

“There is no secrecy. The entire process is guided by the infrastructure concession regulatory commission guidelines/regulations.

"Because it’s a PPP, it has three stages – the project development stage, procurement stage and implementation stage. The project development stage was just concluded with the approval of the Outline Business Case, which the ICRC issued a certificate of compliance. Once the process gets to the PPP procurement stage, there will be an RFQ, Information Memorandum and RFP bidding process which will be made public, competitive and transparent. It is only after the PPP procurement process that the strategic equity investor will be known. At that stage the JV partners will be government and the strategic equity partner. Government’s equity share held in trust for Nigerians will be devolved to Nigerians via an IPO.

"The government will retain only 5% equity, the list of shareholders then will be available to SEC and the Nigerian Stock Exchange. At that point Nigeria Air Ltd becomes a public company subject to SEC, NSE and relevant CAMA rules for public companies. All PPP procurement and ownership moves will be made public. Signed up acceptance and approval of the management concession agreement will be a condition precedent for the IPO."

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He insisted that the government is not funding the entire project. It’s just providing startup capital in the form of an Upfront Grant/Viability Gap Funding. According to him, once the strategic equity investor is in place, they will be expected to build on the initial investment made.

"The OBC made it clear that the strategic equity investors will not start the national carrier; government has to start it in order to attract credible investors.

"$8m represents startup capital for offices required for takeoff. But $300m is the entire airline cash flow funding requirements (aircraft, operations and working capital) for three years (2018, 2019 and 2020).

“This funding can be in the form of equity or debt. The financial model estimates cash flow requirements as follows 2018 ($55m – $8 million is included here), 2019 ($100m) and 2020 ($145m). In order to ensure take of the airline in 2018 government will provide US $55 Million upfront grant/viability gap funding to finance startup capital and pay commitment fees for aircraft to be leased for initial operations and deposit for new aircrafts whose delivery will begin in 2021.

“The remaining financial injection by government will be determined by the quantum of equity that the strategic equity partner will bring as a result of the PPP competitive bidding process. This explanation clearly debunks the claim in the social media that government is paying $300 million for a five per cent equity share.

"Furthermore, with ongoing discussions the cash flow requirement may be lower than $300 million; furthermore, the cash flow estimates contains a 20 per cent buffer that is put in on the assumption that the airline may suffer an operating loss in year 1 due to competition and needto build a brand. As mentioned earlier governments contribution to equity will be in the form of an upfront grant/VGF. Government’s upfront grant/VGF contribution to equity will be funded through either a supplementary budgetary allocation or development financial institutions like AFREXIM bank, AFBD, ISDB etc, who have indicated keen interest in funding the national carrier project because of its bankability and profitability profile.”

Legit.ng earlier reported that the Peoples Democratic Party (PDP) on Friday, July 20, accused the federal government of unveiling a non-existent national carrier in a desperate effort to deceive Nigerians now that election is around the corner.

The national publicity secretary of the party, Kola Ologbondiyan, that it was not funny that the federal government under President Muhammadu Buhari was merely unveiling logos and drawings of an airplane and imaginary routes, without a proper project.

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Source: Legit

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