The Snag with Airport Concessions
Although many Nigerians, including airline operators, are in support of the federal government’s plan to concession the major airports, others have cautioned that if the process is not transparent, it could generate problems that will plunge the sector in
From all indications, no amount of pressure will push the federal government to go back on its decision to concession the nation’s airports. Industry labour unions who are opposed to the airport concessions are threatening to paralyse activities in the industry if government did not rescind the decision. Despite the threat, the government said it will go ahead with the planned concession because it is convinced that the only way the airports could be developed is when the private sector injects funds to modernise airport facilities through public, private partnership (PPP). Also, the government would not be able to raise funds for the airport infrastructure; thus their concessions have become inevitable.
THISDAY investigations revealed that major stakeholders in the aviation industry are in support of the concession plan but many are concerned that the process, if not conducted in a transparent manner could result in controversies may result in crisis that could ground the sector.
The Managing Director of Medview Airline, Alhaji Muneer Bankole told THISDAY that government does not have any option than to concession the major airports. He lamented the decayed infrastructure, noting that although efforts are being made to revamp some of the facilities, only the private sector has the capacity to turnaround the airports for them to compete favourably with others across the globe.
Also, the Chairman of Air Peace, Chief Allen Onyema told THISDAY that he supports the plan by the federal government to concession the airports and expressed the hope that the process would be transparent.
Transparency question
The suspicion that the planned concession might not be transparent became poignant when unconfirmed reports said that top government officials had already slated a popular airport management company in Turkey, Tav Airports Holding, for the concession. The reports might have gained traction when mid last year some officials from the company visited the Lagos and Abuja airports.
Minister of State, Aviation, Senator Hadi Sirika listed the major airports in the country, including the Lagos, Abuja, Kano and Port Harcourt airports for concession, starting with the Murtala Muhammed International Airport (MMIA), Lagos. The federal government, according to the minister had given approval for the concession, adding after the first four, the other airports would also be given out in concession.
“We are going to concession all Nigerian airports, beginning with the four major airports in Lagos, Abuja, Kano and Port Harcourt and later the rest. The President has given his approval and we took it to the Federal Executive Council and it was also approved,” Sirika said.
A former General Manager, Business Development, the Federal Airports Authority of Nigeria (FAAN), Nuhu Adam, told THISDAY that at this point, the federal government may not have alternative to concession, but noted that what would make the concession succeed is the transparency in the process. He noted that there should have been administrative and legal frameworks by now.
Adam also pointed out that the National Assembly and the staff of FAAN to a large extend have been kept in the dark about the concession plan, adding that concession could be a sin qua none to decayed airport facilities, “which has been with us for decades, but we must invite the private sector to help government fund airport renewal and development in a very transparent manner.”
The actions recently taken by the federal government might have allayed the fear that the pogramme would not be transparently done. From the office of the Vice-President, government has started a process that would ensure that concession agreement between government agencies and the private sector ends in a win-win situation.
The Infrastructure Concession Regulatory Commission (ICRC) must oversee the concession process to ensure that it is transparent as the efforts made in the past ended in controversies, which is still haunting the federal government today.
Cautious Optimism
Industry think-tank, Aviation Round Table (ART) in a recent statement on concession signed by its President, Gbenga Olowo, welcomed government’s plan to concession the airports and said that the action was overdue because airlines and passengers have suffered so much due to poor airport facilities. However, the body warned that Nigeria might have worst case scenario if the process of concession is not transparent.
“The ART commends and supports the recent federal government decision to concession airports in the country. We are cautiously optimistic that the policy thrust designed to raise the level of services at our airports is in line with global best practices that will be of pride to all Nigerians. ART’s cautious optimism is premised on the following; that the government recognises the team spirit and interdependence of activities prevalent in the industry,” the body said.
It enjoined government to adopt collaborative strategies in its decision making regarding aviation matters and canvassed for sustained and formidable stakeholders engagement of all relevant elements in the Nigerian aviation industry to reassure, gain confidence and buy-in into the new policy thrust.
“Mindful of controversies that dogged the path of similar exercises in the recent past together with the need for transparency and the adoption of credible legislative instruments. ART implores the government to ensure transparency; accountability and fairness to all stakeholders and participants, which is the hallmark in a concessioning process and will advertently tally with the “Ease of Doing Business” model. The government could demonstrate this by making it accessible to interested members of the public, the report of consultants it engaged with public funds on the airport/ national carrier projects,” ART added.
Gains of Concessions
Many believe there are so many benefits in concession when it is properly done. For one, it removes the funding of public infrastructure from government to the private sector and creates competition, more jobs and profitability, as concessionaires strive to modernise and expand such public utility.
Despite the controversy, the concession of the domestic terminal of the Murtala Muhammed International Airport, Lagos, has been a success in terms of facility upgrade and modernisation, according to industry observers.
Highest Bidder
The International Air Transport Association (IATA) has observed that one of the major factors why there is stunted growth in air transport in Africa is due to high charges levelled on airlines by the state and this include all kinds of taxes in addition to high cost of aviation fuel and attendant taxes on the product in some countries of the region.
On concession IATA has noted that there is a tendency to concession airports to the highest bidder without ensuring that the company has the ability to effectively manage the airport, provide on regular basis the expected innovations, expansion and facility upgrade. The world body also noted that when such airport is given to the highest bidder the company may increase charges in order to recoup its investment in a short period, thus over taxing the airlines, which increase is subsequently passed to the passengers as part of the fares.
IATA noted that all these charges build up exorbitant fares charged passengers in most African countries which tend to scare people out of the airports. This, it said, explains why in Nigeria with a population of about 180 million people, passenger traffic is still about one percent of the population.
The Director-General of IATA, Alexander de Juniac in an interview with THISDAY last year, described concession as mixed bag, which must be managed with care.
Juniac stated: “What we say is that we want governments to be cautious about privatisation of airports. We say to them, be careful because privatisation of airports has not led to cost efficient, technology efficient infrastructure. The experience we had from Australia, from Chile, from Europe is not convincing. So we say, beware. Of course, we understand that to run the airport as opera- tions, privatising or even concession is much better than having civil servants doing the job, that’s for sure. Then we come to the process of choosing the concessionaire, which in many countries is based on the man who is buying at the highest price. So it means that the cost increases, at the end of the day the bill is sent to the airlines. And we say in the choice of the concessionaire, they always should look at other criteria.
“We favour privatising the operation through the concessionaire with a process that is not only based on choosing the man who is paying the highest price, we say to government, be cautious about privatising the ownership of the infrastructure, be careful because you may privatise a local monopoly that may go out of control. If you do that, be able to implement a strong regulatory body. And, frankly, there is nowhere in the world, perhaps, except in the UK, that the regulation has been successful.”
However, Sirika said the decision to run the airports through private operators was born out of government’s desire to have effective and efficient management of the airports and adequate utilisation of the abundant skilled manpower in the aviation sector.
He said: “There are entrepreneurs, high net worth and knowledgeable people whose business is to be in the promotion, construction, selling and providing of airport facilities around the world. It is the business they know how to do and they also make money out of it.”
Unions Divided
But the Minister and the federal government have been criticised for not carrying labour along. But a top government official told THISDAY that it was not true, noting, as expected, labour is defiant and seemed transfixed in its position as strong opposition to concession. But the workers of FAAN who are the most apprehensive about the concession programme are miffed that they have not been carried along. To them, the concession of the most viable airports is a dark cloud, which is gathering to usher a turbulent future to their carrier. Despite assurances from government that their welfare would be taken care of, the workers still wear a visage of cynicism, especially for those who are discerning enough to know that the labour unions that would have stood and fight for them have been broken.