By Chris Aligbe
The Airline Subsector is a major component of the global aviation industry, an industry whose life-wire is heavily supported or dependent on Agreements of all sorts and forms. Agreements could be Bilateral, Multilateral or Open-Skies. Such Agreements cover Leases, Operations, Maintenance and Investments.
Keeping faith, absolute faith, with Agreements, as in most businesses, is the norm. It is this faith and respect for the terms of Agreements that build trust. Conversely, disrespect to Agreements in part or in whole creates a TRUST-DEFICIT. When Trust Deficits become endemic or the norm, Investors keep away from the country, sector or organization. This appears or is the situation with our Aviation Sector, but more remarkable, with the airline Subsector.
Over the last forty-five (45) years, the Nigeria Aviation sector has been replete with violations of Agreements, particularly in the airline subsector. This has become a deterrent to Investors in the subsector. Although this unfortunate situation has occurred at the Domestic level, its occurrence at the International level is not only alarming but also accounts for the lack of interest of foreign and even local investors to respond to any opportunity or advertised request to invest in Nigeria airline subsector.
DOMESTIC
At the domestic level, our airlines over the years have more often than not failed to meet their Loan Obligations to banks. Worst still, our three Domestic Airlines that were listed in the Stock Market collapsed, leaving investors with great losses. At the Domestic level, only a few airlines can pass through financial due diligence with respect to financial management and source of funds. This is critical in a global sector that thrives on transparency. But the greater challenge came from the international sector.
Our history shows that as early as 1979/80, the Nigeria Airways/KLM relationship broke down. Since I was not in the airline industry then, I cannot give an account of what happened as it would be based on hearsay. Also, in the middle 80s, Nigeria Airways was expelled from IATA for failing to meet its financial obligations. But from 1989 when I came into the industry up till 2023, over fifteen (15) Agreements that were violated in airline subsector defined our profile and reputation. These include:-
Bannax Airline (1990 – 91)
Bannax Airline was floated by a Nigerian Generator Merchant who leased 3 Boeing B373. His operational base was to be Port Harcourt. The then Minister, Alabo Graham Douglas paid glowing tribute to Mr. Desmond Iwuagwu, the founder, praising him for making Port Harcourt his base. But when he went for his AOC from the then Federal Civil Aviation Authority, FCAA, the precursor of NCAA, the Director of Airworthiness – Dr. Segun Demuren informed him that his three aircraft were due for C-check and had to undergo it before he could be issued AOC. The fact was that Desmond went to lease the aircraft without advice or technical input of an Aircraft Engineer. The Leasing Company (ILC) capitalized on his ignorance and leased the dud aircraft to him. Angered by this, Bannax grounded the aircraft for six years, refused to pay any lease rental and stopped FCAA from re-leasing the aircraft with a court restraint. Two times, Dr. Demuren escaped arrest by Bailiff on account of contempt over Bannax. It took a court action by Prince Tony Momoh on behalf of the Lessor to secure the release of the three aircraft. But for about six years, the Lessor, at every International Aviation Conference vilified Nigeria and its government for holding its aircraft. Nigeria’s image and reputation were smeared beyond redemption. The global Leasing Companies imposed high re-possession Insurance and barred Nigerian airlines from Dry Lease.
Nigeria Airways– CES Travels
The CES Travels was the General Sales Agent (GSA) appointed by Nigeria Airways to sell its tickets first in UK and then extended to the USA. It was owned by a British-Indian national. CES had exclusivity clause in its Agreement. CES was appointed during the Management of AVM Anthony Okpere and since it was considered to be doing well, it was retained by the succeeding Managements of General Olu Bajowa and the AVM Bello-led Presidential Task Force (PTF) on Nigeria Airways. However, the Capt. Jonathan Ibrahim Management which succeeded the PTF was convinced that the Airline would do better without the services of CES Travels. It consequently convinced the then Minister – Alabo Graham Douglas to cancel the GSA with a warped policy fiat that all GSAs within and outside Nigeria selling Nigeria Airways tickets must be owned by Nigerians. The CES GSA Agreement was repudiated without any recourse to the terms. To ensure ticket sales in UK, the Management headed outside London to appoint a new GSA. The woman, who owned CES went to the new GSA, bought ticket and headed to court to file a suit against Nigeria Airways for contract violation. The court granted her request and issued an injunction restraining Nigeria Airways from selling any ticket in UK. Faced with this difficulty, the Management directed our Regional Manager, Mr. B. S. Anugwom in London to start selling tickets in our Conduit Street Office. The CES Travels owner also quietly sent somebody to buy tickets from the office and headed to court for contempt. The court ordered the arrest of our UK Regional Manager. Our Manager had to stay away from office to escape Bailiffs. Capt. Joji, who took over from Capt. Ibrahim in early 1992 confronted this problem. He brought the case before the then Minister of Justice, Mr. Akpamgbo (SAN), who was on some official trip in UK. Akpamgbo told Joji that the airline was in danger of being closed down by the suit as it might not be able to meet the financial award to CES. But when the Minister found that he knew the CES Attorney, he worked out an out-of-court settlement that cost Nigeria Airways £20million. The CES saga was in the global domain.
The DC10-30 (4W) Return to KLM Maintenance Yard
The DC10-30 (4W) was the last DC10 manufactured by McDonnell Douglas. It was acquired by Nigeria Airways through Lease Purchase in a complex Lease-Finance engineering that involved trading off the Airline’s B747 (Spirit of Courage). The Finance-Lease was brokered by the AVM Bello-led PTF with Equator Leasing as the Lead Lessor of a Consortium of three other Companies. Although the Lease-Finance Agreement received Award from Air Finance Journal at a Mombasa Conference in 1990, quite some Senior Managers of Nigeria Airways, including Joji, Agom, both CEOs of Nigeria Airways after PTF were convinced that the “4 whisky” was the most expensive DC-10 in the world. The lease rate, insurance and monthly maintenance reserves were considered too high. It was still foreign registered as the full payment was yet to be made. On assumption of office in January, 1992, Capt. Joji who was a member of the PTF, sought to de-register the aircraft from foreign to Nigeria register, an action that would have reduced significantly, the monthly maintenance payment, insurance and lease-finance payment. But Equator Leasing rejected his attempt. With some advisory, Joji flew the aircraft to KLM maintenance yard, ostensibly for maintenance, dumped the aircraft deliberately and refused to meet the Agreement terms. Joji’s calculation and strategy was that the Lessors led by Equator Leasing would go to court over the breach. And since McDonnell Douglas, the Manufacturers of the Dc-10 were part of the Lease-finance arrangement, it would be a respondent in the suit based on First Law Default Guarantee – FLDG. If this happened, Joji hoped, McDonnell Douglas would give the true value of the aircraft and given the Deposit Nigeria Airways paid for the Lease-finance and the monthly lease rentals of over 5 years, the balance which stood at US$30million would be reduced by at least US$10million. However, Equator Leasing et al did not go to court before Capt. Joji was removed by IBB and replaced with Engr. Andrew Agom as a kind of incentive to convince the then Senate President – Distinguished Iyorcha Ayu, Agom’s long-time associate and personal friend, to push his transition to Civilian President. It was a failed gamble.
But a breach had occurred and entered the record Book of Breaches against Nigeria in the Leasing World. And Joji had no chance to retrieve the aircraft which he had hoped to do if the actual price was determined by the court. Unfortunately, the CEOs after Joji; Agom, Peter Gana and Jani Ibrahim, due to the nature of their removals and appointments, did not receive handover notes from their predecessors. They knew nothing about Joji’s strategy and did not care about the DC-10 “4W”, particularly for Agom and Gana. By the time Jani was appointed, Nigeria Airways had ceased operating to London and Sani Abacha had banned British Airways from coming to Lagos. Even then, US$30million debt on the DC-10 was outstanding claim by Equator Leasing et al supposedly represented by one Jeff Ashfield, who throughout Group Captain Peter Gana’s tenure, taunted him with a lien on Nigeria Airways aircraft still operating to London. The DC-10 saga was ended by Capt. Benoni Briggs, a Nigeria Airways Airbus Pilot, who became Aviation Minister under General Abubakar, who succeeded Abacha as Head of State. Briggs pleaded with Abubakar to pay off the US$30million to enable Nigeria Airways resume the London route operations. Abubakar directed the Nigeria High Commission in UK to authenticate and negotiate the debt. The High Commission did and reduced the debt to US$20million, which Nigeria paid. The money was paid, the breach had occurred and, sadly, the DC-10″4w”, the last of its type that was manufactured was LOST to Nigeria Airways in spite of over US$80milion paid in totality.
The Breach and Loss of the youngest A310 aircraft in Nigeria Airways fleet to Sabena
In his effort and build-up towards the floatation of “Air Nigeria” in 1992, Nigeria Airways had secured a Loose Partnership Agreements with Swiss Air and Sabena Airlines. The relationships were brokered by Keith Bolshaw, Consultant/Transaction Adviser. While Swissair was to provide start-up principal managers and catering (Gourmet), Sabena was to handle Maintenance of the three aircraft (1DC-10 – ANN and 2 A310s) on Lease from Nigeria Airways at monthly rate of US$600,000 for the take-off of Air Nigeria. Everything was going on well as it were; as meetings and negotiations were held and conclusions reached. The first A310 was flown to Sabena Maintenance Hangar in furtherance of the Project. Then came the INCUBUS. There was an aspect of the Agreement with Sabena that required the concurrence and endorsement of the Aviation Minister as government representative. The then Minister was Chief Wole Adeosun. The Minister refused to sign on the grounds that neither the TCPC nor Nigeria Airways consulted him or sought his approval to privatize the airline. Tony Momoh, who was the then Chairman of Nigeria Airways Board disagreed with Adeosun. He informed him that he, Momoh, was a Minister in the IBB Cabinet when the Decree on Privatization and Commercialization was enacted and that the airline, like other Organizations listed for privatization in the Decree did not need any other approval, let alone Ministerial. The bitter acrimony that ensued between them culminated in Adeosun not only refusing to sign the Sabena Agreement but also led to Adeosun’s push to sack Momoh’s Board and in reprisal of Momoh’s blocking of Adeosun’s run for the CBN Governorship. It was like Late Sports Commentator, Walter Oyatogun would say, “one one goalless draw”. While these played out, with Joji and Momoh removed, Sabena Agreement was breached and Nigeria Airways aircraft was seized by Sabena and nobody bothered. Over the years, Sabena dismantled the engines of the Airbus, cannibalized it and sold the frame to a Restaurant Operator, who used the aircraft as a Restaurant.
Jani Ibrahim’s Nigeria Airways/British Airways
Joint Venture
Jani Ibrahim took over the CEO of Nigeria Airways from Group Capt. Peter Gana. Jani, a first-class Engineer from Manchester University played in the oil industry, but was a complete Rookie in aviation. He was however probably one of the smartest CEOs that presided over the airline. Jani was simply a businessman who saw airlines as business. Faced with depleted fleet – 1 DC-10-30 “ANN”, 2 A310s and 2 B737s and routes from Lome to Dakar, Douala, Libreville, Jeddah, London and New York as well as Insurance and over flight payments defaults, Jani Ibrahim thought out of the box. One of the results of this thinking was the JV between BA and WT. The JV, which was accepted by BA in a classic enlightened self interest, offered a B747 aircraft painted in a Nigeria Airways Livery to operate Nigeria Airways Lagos-London route. Under the JV, Nigeria Airways had 80 seats (70Economy and 10Business Class) free, another 20 seats at 50% of the prevailing fare and another 20 seats at 75% of the prevailing fare. The JV was approved by the then Minister – Dr. Olusegun Agagu. The JV earned Nigeria Airways monthly revenue of N100million minimum. It was the mainstay of a distressed WT.
By the year 2000, Yomi Jones succeeded Jani Ibrahim as MD of Nigeria Airways. Yomi Jones was Lufthansa General Sales Manager, Nigeria and West Africa. While at Lufthansa, Jones was very critical of the JV for whatever reason. So, when he became MD, it was not a surprise that he pushed his objection to the point that led in part to the repudiation of the JV Agreement. Jones did not do this alone. Unknown to him, the Obasanjo government had decided to liquidate Nigeria Airways against the advice of IFC and in his repugnance for the JV, walked into the grand plan and the then Minister – Dr. Kema Chikwe welcomed the unsuspecting Jones with open hands and used his alloyed Brief to repudiate the JV. Even when BA, in their enlightened sell-interest, which was to forestall the repeat of Abacha kind of ban from the route, offered to give Nigeria Airways one of its DC10s, pro bono, checked and painted in WT Livery, and a grant of £1million, Kema and Jones turned it down. The events that followed cost Jones his job. No stain of corruption can stick on Jones’ body. The global aviation industry knew of this most unreasonable repudiation, and the rejection of the generous effort to lift up Nigeria Airways.
The Sudden Unilateral Rejection of IFC NEW-Co
In 1999, the President Obasanjo Administration appointed the International Finance Corporation – IFC, the business arm of the World Bank, as Transaction Adviser for the Privatization of Nigeria Airways. The appointment was applauded in the aviation world. It was believed that with IFC, Nigeria was now serious and ready to return to global reckoning in Aviation. And all eyes were on IFC as the world awaited the outcome of its success. The World Bank establishment did a yeoman’s job. Between year 2000 and 2001, it produced one of the best documents on Nigeria’s airline subsector with an impeccable justification for the privatization of the erstwhile National Carrier. IFC recommended the floatation of a new airline from the huge assets of Nigeria Airways. It called the new floatation New co (New Company). IFC recommendations were accepted and approved by all Statutory Bodies concerned; Aviation Steering Committee (ASTRIC) of the Ministry of Aviation, Bureau of Public Enterprises (BPE), National Council on Privatization (NCP) and the Federal Executive Council (FEC).
IFC was at the stage of going to market to sell the New co as well as to negotiate with creditors of Nigeria Airways when OBJ inexplicably directed his Minister, Dr. Chikwe to undermine the three major bases for IFC recommendations. He then directed, against IFC strong recommendations, the liquidation of Nigeria Airways. Miffed, IFC voluntarily withdrew. The aviation world was aghast. It was considered that if Nigeria dealt with such a reputable institution in such a manner, then Nigeria was irredeemable, more so, as Obasanjo did not give any plausible reason for its action. But this sad situation went into our negative, albeit, ignoble global record.
Virgin Nigeria Agreement Repudiation
Obasanjo’s second term began May, 2003. By 2004, Obasanjo had dreamed up an idea of floating an airline of “Special interest”. Nigeria Airways had been virtually liquidated, its billions of Naira worth of assets at home and abroad sold off in a bazaar whose revenue is up till today unaccounted for. Its last DC 10 (ANN) which was not Beyond Economic Repairs (BER) was abandoned at the MMIA cargo tarmac to rot away. President Obasanjo’s “special interest” airline was Virgin Nigeria. Virgin Nigeria came like a thunderbolt as there was no information, let alone discussion about it. Nigerians woke up one day to see Obasanjo and Richard Branson – owner of Virgin Atlantic, launching the new dream airline at the Villa. Nigerians were given the impression that it was a National Carrier in replacement of Nigeria Airways. But this was utter falsehood. Virgin Nigeria was a purely private airline that was given rights that could only be given to a National Carrier, such as rights to all existing BASAs and right of first option to any new BASA, right to operate its Domestic flights from the international terminal of MMIA, right to provide the entire Management as well as right to lease all the aircraft for operation. Virgin Nigeria was owned 51% by Nigerian Institutional Investors (names kept secret) while 49% was held by Virgin Atlantic (24.9% by Branson and 24.1% by Singapore Airlines, which at that time owned 49% equity of Virgin Atlantic). Up till date, no one in the industry can categorically say who actually owned what of the 51% Nigerian equity. Its private airline status was confirmed by the then SSA to President Obasanjo, Professor Ihionbare in his response to late Nick Fadugha’s complaint about the concessions given to Virgin Nigeria. The only clear knowledge to stakeholders was that President Obasanjo was the PREMIUM MOBLE for the airline. Stakeholders in the industry found the Virgin Nigeria terms and concessions obnoxious and repugnant. It was therefore a relief for stakeholders in the industry when, on assumption of office in 2007, President Yar’dua of blessed memory, instructed Virgin Nigeria to take its Domestic operations out of MMIA to the Domestic Terminal. Sensing that the President was bent of reviewing the entire Agreement, Richard Branson pulled out completely from Virgin Nigeria, took US$24million for the use of the Virgin Brand and demanded the immediate ceasure of any more display of the Virgin Brand. Then Richard Branson went wild in global news media to denounce Nigeria as a disrespecter of Agreements. He said that “Nigerians are good people but their leaders are CORRUPT”. He added that Nigeria is a country where he would NEVER CONSIDER DOING ANY BUSINESS.
And because those who partnered with Branson on Virgin Nigeria were still hiding their identities, they could not speak up or challenge him. And so, the WORLD and indeed many Nigerians believed Branson.
The Breach of the Cape Town Convention through violation of NCAA IDERA
After seventeen years of the Bannex debacle, precisely in 2007, Dr. Segun Demuren, who assumed duty as the DG of Nigeria Civil Aviation Authority (NCAA) in 2006 signed the Cape Town Convention, got it domesticated and deposited in UNIDROIT, Rome in March 2007. In July 2007, he filed the Domesticated Convention with the International Registry, Dublin, Ireland. The Cape Town Convention (CTC) is an International Treaty for aircraft Fleet Renewal that will not require a Leasee to provide any collateral or provide Re-possession Insurance for any aircraft on Lease since the aircraft or mobile equipment would self-guarantee. To ensure its implementation, NCAA like other CAAs, developed an instrument called IDERA (Irrevocable Deregistration and Export Request Authorization). IDERA is signed by Lessees to give comfort to Lessor that whenever the Lessee default, the CAA on the Lessor’s request, would deregister the aircraft in question and allow the owner/Lessor to re-possess its aircraft. For ten (10) years, Nigerian airlines had a breath of great relief as they could and did acquire aircraft under Dry Lease rather than the more expensive and killing Wet Lease. By 2017, came the incubus again as two Domestic operators, one a scheduled airline and the other a private Jet Operator that was doing business in the Oil sector, repudiated the IDERA by going to court to stop NCAA from allowing the Lessor to re-possess their aircraft for years. Whatever the depositions of the operators, their claims could not and did not extenuate the fact that by repudiating the IDERA, the implementation instrument for CTC, they, ipso facto, violated an international Convention in consequence of which Nigeria was for the second time blacklisted in the Leasing World and banned from Dry Lease. So, for eight (8) years, 2017 – 2024, Nigeria Domestic Airlines bore the expensive burden of Wet Lease until the current Minister of Aviation and Aerospace, Festus Keyamo, a Senior Advocate of Nigeria (SAN), pulled up everything in the books from his over three decades in the Inner Bar to pull the country out of the quagmire of the CTC violations. It was a yeoman’s achievement, not to say the least.
Nigeria Air/Ethiopian Airline Agreement
The last administration of President Buhari made a commitment to float a new National Airline in replacement of the liquidated Nigeria Airways. Great efforts were made to actualize this objective. Agreement was signed, investment conference held while marketing meetings were held. The floatation was at stage 2 and six pilots and 12 cabin crew were undergoing training for AOC application when the Project was botched with a complex campaign by those who were not comfortable with it. Again, we repudiated the Nigeria Air Agreement, using a court action. Also, during the period of Wet Lease, there were many violations of Agreement too many to mention. For example, Bellview Airline in the 90s failed to meet its obligations (Lease rental and crew salaries) on its Leased Airbus and the foreign crew, after a press briefing to aviation correspondents at the Presidential Lounge of MMA, flew the aircraft back to the Lessor. This also happened with a B747 leased by Kabo Airlines for Hajj Operations. Kabo did not meet its Lease obligations and the crew, on behest of the Lessor, on its return flight from Jeddah, overflew Kano and returned the aircraft to the owners while Hajj passengers were waiting on ground at Kano Airport Hajj Terminal. I can go on and on.
So, over the past three and half decades, we have built and sustained a high profile of an industry, albeit, a nation that has no respect for Agreements in the airline subsector. This profile played out in the botched Nigeria Air Project.
Nigeria Air – The
Trust-Deficit Evidence
One of the requirements of the ICRC for PPP is the appointment of a Transaction Adviser. Towards this, the Federal Executive Council (FEC) accepted and approved the ICRC/Aviation Ministry’s recommendation of Lufthansa Consulting. Lufthansa Consulting is a world-class consulting firm in the airline subsector. But, when it submitted its terms, the FEC found the terms obnoxious, denigrating and clear evidence of lack of trust. For instance, one of such terms was that the entire cost of the consultancy should be paid into an escrow account to ensure that Nigeria would not fail to meet its payment obligation. This was considered a clear manifestation of lack of trust and an act of bad faith by the FEC, which then rejected Lufthansa Consulting.
At the end of Covid, the new Transaction Adviser held a virtual Investment Conference in 2021 to market Nigeria Air. Records show that over 100 potential investors, both international and local, including our Domestic Airlines participated. This was after Adverts had been placed in both national and international media organs, inviting investors. Yet, there were no “Expression of Interest” from anywhere. Also, available information showed that the then Aviation Minister, Hadi Sirika’s efforts, to woo Emirates and Etihad yielded no result. Then, the President, Buhari and Sirika were in Qatar but Qatar Airways said they had some challenges with Airbus over pre-Covid orders, that Covid impact affected their plans and could not therefore invest in Nigeria Air. Yet, Qatar was already considering investing in the new Rwanda air. Today, Qatar holds 49% equity in Rwanda air. So, when Ethiopia Airline opted to invest 49% equity in Nigeria Air, it was a welcome relief. This is why it saddens that instead of realizing our predicament and that our airline subsector has become an anathema to investors, many of our stakeholders spent time and energy vilifying Ethiopian Airlines. As I said in one of my earlier write-ups, whatever mistakes perceived in the botched Nigeria Air’s PPP, real, imagined or foisted, Nigerian negotiators have the questions to answer. For the information of those that believed that we should shop for investors from the Far East, Asia and Oceania, in the history of airline investment, no airline from that region has ever invested outside their region. Singapore Airline’s attempt in Virgin Atlantic did not work. Ditto US Carriers. It’s only recently that Delta Airlines took 49% equity in Virgin Atlantic. European Airlines are consolidating in their region; Lufthansa has acquired stakes in Sabena, Swiss, Austria, ITA (Italian National Carrier that replaced Alitalia), while bidding to acquire stakes in TAP Portugal (National Carrier of Portugal). BA has BMI, and Iberia (Spanish National Carrier). Air France and KLM are almost one airline except in name. As at today, only Middle East Airlines are investing outside their region. But these Airlines, as I pointed above, loathe investments in Nigerian Airlines. For those who reject Ethiopian Airlines on the grounds that it is a competitor, please which airline is it competing with? ET has over 140 operating aircraft compared to Nigeria with less than 50 operating aircraft by all our airlines put together. Nigeria has only one airline operating just one notable intercontinental destination – London, against ET, that now operates over 40 international routes (Africa and intercontinental), in addition to its membership of Star Alliance, World Largest Alliance with over 2000 destinations. Can we in sheer humility, swallow our Non-existent Pride? More critically, in the global airline sector, the focus is no longer Competition, but Cooperation, for market and route enlargement.
In the airline subsector, we have sunk and in the deep. In this situation, only a Deep Sea Diver can pull us out. Otherwise, one can ask QUO VADIS NIGERIA?
However, hope is not lost in view of recent events. I believe only President Tinubu, Nigeria’s Chief Investment Driver (CID) can fix it.
•Chris Aligbe, Aviation Consultant
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