Can Nigeria be trusted to run a National Airline Carrier?
A brief look at the success of government run/funded airlines plus a few issues that we must be clear about
Generally speaking, government run/funded airlines have almost always been bad idea’s. There is the argument that Nigeria will be one of the few exceptions.
But the aviation business requires efficiency, attention to detail, integrity, financial discipline and ability to isolate vested interests; these are traits that Nigeria has continually struggled with.
Nonetheless, a few weeks ago this story in the Guardian confirmed that plans to build a national carrier are underway. This article will look at the advantages and disadvantages of a Nigerian national carrier.
Helping to bridge the infrastructure deficit
According to the World Bank, every 1% of government funds spent on infrastructure leads to an equivalent 1% increase in Gross Domestic Product (GDP). A national carrier will, to some extent, help the infrastructure deficit by providing regular, affordable transportation to major cities across the country.
Developing Nigeria’s aviation industry will develop the economy and provide jobs. The private sector has not maximized the opportunities that the sector holds. Perhaps that is why the government feels the need to intervene.
It is possible for a national carrier to help boost Nigeria’s tourism industry. A national carrier may be more committed to the promotion of Nigeria’s destination than the privately run airlines.
Kenya’s income from tourism was nearly $7bn in 2016, Nigeria desperately needs to diversify it’s sources of income. Access to tourist resorts such as Obudu cattle ranch, Yankari game reserve, Idanre hills and Kajuru castle is an important part of the tourism value chain.
Earn Foreign Exchange
It is easier for a camel to pass through the eye of a needle today, than it is for the average Nigerian to obtain forex at the CBN rate. Foreign exchange is scarce in Nigeria today. The government should explore all avenues to earn foreign exchange. The establishment of the national carrier is potentially one of those avenues.
Where to start is my problem….
National carriers all over the world have demonstrated an amazing ability to lose tremendous amounts of money.
From Malaysia airlines that essentially received a bail out from Malaysia’s sovereign wealth fund in 2014, to Alitalia ( recently “lent” around €400m by the Italian finance minister in order to keep it flying through the next few months), to LOT Polish airlines (received over $200m state aid in 2014) to South African Airways (scheduled for an undisclosed bail out amount after posting losses of approximately $350m).
After September 11th attacks, the American government provided airlines with $5 billion in cash to cover immediate losses.
All around the world the story of the archetypal national carrier is one of pain, drain (on the government coffers), incompetence, lack of transparency, nepotism and grief. This results in a cycle of unsustainable government bailout’s.
This is partly because upon the realization that government is failing to run these airlines properly, private funding is sought. But investors are not NGO’s or charity workers. Obtaining private investment for these national carriers is often fraught with difficulty. The heavy losses, debts and legacy costs scare investors away. In fact, sometimes it might be cheaper to start an airline from scratch the way Switzerland did.
Given “abysmal” record of state-owned airlines, many would argue that governments have no business being in this business. Especially since the average cost of a bailout seems to be about $300-$400m. Its easy to see from the article below why we shouldn't even attempt to put ourselves in a situation where we could be potentially bailing out an airline right now. $400m is nearly half of our healthcare budget!
However, let us not forget the success stories like Ethiopian Airlines ; EA is currently the fastest growing, most profitable and largest African airline. Since 2005, the airline has grown at an average rate of between 20–25% per year. Its profits in 2015 amounted to $175 million.
Emirates, Etihad and Qatar airlines are market leaders and innovators that also received a degree of state funding, according to some sources up to $50bn ( x3 Nigeria’s yearly budget), although for the most part are privately run.
The question is not ‘is it possible?’. We can see that it definitely is.
But should a national carrier be a priority for today’s government?
Does the FG have the funds, the vision, the discipline, the neutrality and the bandwidth to build a national airline?
Will committing hundreds of millions of dollars into an airline project produce the most benefit for most Nigerian citizens?
These are the questions we need to answer.
Airlines are undoubtedly important for a country’s economy, but most now accept that does not mean they have to be state-run.
Dr Ola Brown(Orekunrin) is a medical doctor who is training to be a helicopter pilot. She founded West Africa’s first indigenous air ambulance company; the Flying Doctors Nigeria Air Ambulance. Her work involves using aircraft to transfer patients from areas where they have overwhelmed the level of care to more suitable levels of care.
Read more about her work across Africa: at www.flyingdoctorsnigeria.com