Nigeria Planning Airline on $2 Billion Aviation Expansion

Source: http://www.bloomberg.com/news/2014-09-29/nigeria-plans-airline-to-profit-from-2-billion-aviation-program.html

Nigeria, a country of 170 million people that has no national airline, is in talks with private investors about setting up a new flag-carrier as it expands airport infrastructure, Aviation Minister Osita Chidoka said.

Nigeria will spend about $2 billion over four years on rebuilding old airport terminals and constructing new ones as demand for travel swells, Chidoka said in an interview with Bloomberg TV Africa to be aired Oct. 3. The government wants to start a national carrier within the same period to tap growth.

“It will be commercially run,” Chidoka said in New York. “Conversations are on across many possible private sector organizations, both local airlines in Nigeria and then some international airlines.”

While Ethiopian Airlines Enterprise and Kenya Airways Ltd. have emerged as global players in recent years, Africa’s most populous nation has lacked a major carrier since the demise of Nigeria Airways a decade ago. That’s allowed fast-expanding Gulf operators such as Dubai-based Emirates to join older European players in grabbing the most lucrative long-haul traffic.

Nigeria, Africa’s biggest economy, signed a $500 million loan agreement last year with the Export-Import Bank of China to fund new terminals in four cities including the capital Abuja, the commercial hub of Lagos, the southern oil center of Port Harcourt and the northern city of Kano. The contract was won by China Civil Engineering Construction Corp.

Branson Experiment

“We are totally changing the face of four key airports,” Chidoka said in the interview. Nigeria is studying “the possibility of attracting private capital to do that.”

The government is also building 13 cargo airports across the country for the export of perishable agricultural produce such as pineapples, mangoes and tomatoes.

About $1 billion has been provided by the state for the current plans, with another $1 billion earmarked within the project’s duration of four years, according to Chidoka.

Nigeria liquidated Nigeria Airways in 2003 and replaced it with Virgin Nigeria (IMARANF), a joint venture in which Richard Branson’s Virgin Atlantic Airways Ltd. originally held a 49 percent stake. The airline changed its name to Air Nigeria in 2010 after Branson pulled out and it ceased flying two years ago.

Lagos-based Arik Air Ltd., a closely held company, is now the West African nation’s largest carrier with 26 aircraft, according to its website. Competitors include Aero Contractors Ltd., Dana Air, Med-View Airline Ltd. and Overland Airways Ltd.

Expansion Target

By contrast, Ethiopian Airlines emerged from decades of turmoil in its home country to establish itself as sub-Saharan Africa’s second-biggest carrier after South African Airways, building a modern fleet including Boeing Co.’s latest 787 Dreamliners. Kenya Airways, the No. 3, is listed on the Nairobi stock exchange and counts Air France-KLM Group as an investor.

West Africa is also becoming an expansion target in the absence of a strong local carrier, with Ethiopian Air taking a stake in Togo-based Asky Airlines and SAA saying in June it was evaluating Ghana as a base after earlier considering Senegal, though plans could be held up by the Ebola outbreak.

The number of air passengers traveling both domestically and internationally in Nigeria surged to 3.75 million last year from 520,263 in 2003, according to World Bank data.

“Privatization of some operations of the airports may be on the cards,” said Chidoka. “It will most likely be airport management, things like that, collecting of revenues, managing lounges.

Though i admit near zero knowledge of the operations of the capital market,I just wish this initiative can come to the capital market so that Ordinary Nigerians can have access to the ownership of National Assets,it will promote a sense of inclusion. I know the logistics might be more compared to just getting private investors but if done,Nigerians in their hundreds of thousands will buy in anticipation of high returns on investment.It will strengthen nation-citizen bond also.