As the clamour for the concession of airport facilities grows, Chinedu Eze examines its advantages and disadvantages and why it may not be a panacea for airport development in Nigeria.
One of the major factors that have given rise to recent clamour for the concession of airport is failure of the federal government to complete the rehabilitation of airport facilities, which it embarked on about four years ago.
The project called airport remodeling had given Nigerians hope of a better future for the aviation industry. So, when the project was abandoned, Nigerians became frustrated and expressed fear that the Federal Airports Authority of Nigeria (FAAN) as a government agency might not be able to develop the airports to upgrade them to the standards obtainable in other parts of the world. Their position stemmed from the fact that government may not be able to fund airport development projects anymore; not when Nigerians need good roads, more hospitals, improved electricity and other social needs, which are the direct responsibility of government.
So those who are clamouring for concession reason that as the private sector is willing to invest in airport development, the facilities should be handed over to them, rather than government holding tight to them when it does not have the wherewithal to develop the infrastructure
Those who are for airport concession are quick to cite the Murtala Muhammed Airport Domestic Terminal (MAA2) as a good example of the private sector driven airport facility development. The terminal was built by Bi-Courtney Aviation Services Limited (BASL) under a build, operate and transfer agreement. The terminal was opened in 2007 and today when compared to the airport terminals being managed by FAAN, MMA2 is relatively better in terms of passenger facilitation, modern facilities and IT equipment.
Nigerians, who are pushing for the concession have suggested that government should development a policy on airport concession and put in place administrative and legal frameworks that will provide the platform for transparent concession agreement that would be fair to both government and the investors.
They also argue that the 22 airports under the FAAN management are too much for one organisation to manage effectively.
Concession Models
The CEO of BASL, Christophe Penninck opined that for Nigeria to develop its airport infrastructure, it must have to privatise. He recommended different models of privatisation, which include full privatisation, joint venture and management contract.
He explained that the management contract style must be run like a private sector; electricity must be constant, landing and navigational aids must be upgraded and the fiscal environment must change, as domestic airlines must get some level of protectionism.
This, he said would give rise to the review of multidesignation of foreign airlines to various airports in Nigeria. He also said that agricultural goods must be transported by air, which means that cold room facilities must be developed at the cargo terminals.
Penninck observed that out of 22 airports under the management of FAAN only about four are profitable, which include the airports in Lagos, Abuja, Port Harcourt and Kano and suggested that to make the other airports viable, government must consider the take over of these airports by the states where they are located; otherwise they could be closed.
He also suggested that FAAN could be divided into three organisations and should not be an authority anymore, adding that the agency could be privatised and there would not be any government money needed to do this.
The BASL CEO also said that it would benefit the federal government if FAAN becomes more efficient but as it is now, “FAAN cannot present good performance because it is not transparent with its revenue, its tenders and hiring processes.”
Penninck also said the agency could not prioritise such essentials like maintenance of current airport terminals, provision of power, upgrade of runway, remarking that FAAN does not seek for new airlines or support stakeholders.
Industry consultant and CEO of Belujane Konsult, Chris Aligbe said FAAN cannot improve the airport, no matter how long you leave it to manage the airports, but further concession of airport facilities must follow transparent process.
“MMA2 for me was a great idea. It was the first major success of the Obasanjo administration. It was a kind of mental re-orientation of the industry that a Public, Private Partnership (PPP) is possible. What was wrong with MMA2 was how they reached the concession agreement. Those who were supposed to be involved, the statutory managers of the airports were not involved in the design of MMA2. The managers of the airports felt that they were bypassed because the owners of MMA2 dealt with the people of the highest authority. So they did not make an agreement that would meet all given legal standards that would make it relevant beyond a favourable government in power. They forgot that the man in authority would come and go and then you are left to relate with those who manage the industry,” Aligbe said.
He said it is possible to concession the airports the way they are, but government must get serious concessionaires who know what is involved. We are not going to derive more from the onset of the concession.
“But if you structure your concession properly, looking ahead, you will derive more. If you don’t have money to develop it you concession it to the organisation that can develop it but those who are coming for concession should ask that the agreement should be justiciable both in Nigeria and outside Nigeria concurrently.
“They will require concurrent jurisdiction because they believe if anything happens here they will go out and take the government to court there. They will secure their judgment and be able to secure their money. We should be prepared to do that because we have an image of serial breach of agreements in the industry. We need to clean up this image. We need to come out and do it transparently so that we move ahead. The ones we have done before, we did not do it transparently and those who did it didn’t have the full knowledge of what they were doing,” Aligbe also said.
Demerits of Concession
Although, concession seems to be a panacea to airport funding and development, this model has many disadvantages, especially in Africa. Besides the controversy that trailed the concession of the Lagos airport domestic terminal, a lot of issues came up when it became operational. There was a dogged fight to force all scheduled airlines to operate from the terminal, which two airlines, the then Virgin Nigeria Airways and Arik Air resisted, insisting that the airport had technical limitations and that the apron was not big enough to take in their fleet of all the domestic airlines.
This was an indication that in Nigeria, everything is mired in politics. The way the concession was secured and the way some of the airlines resisted operating from the new terminal showed that the law does not always prevail in Nigeria. That notion has not changed. Government and its agencies are always unwilling to abide by the rules and whenever an individual or organisation finds favour with government it can go overboard, abusing privileges and ripping off the public while standing on government support platform.
Again, when the terminal became operational the charges that the management wanted to level on the airlines were so outrageous that it would have impacted on airfares and knocked out many passengers who would not be able to afford the new outrageous fares.
This shows that concessionaires may be eager to recover his investment and may not have patience for long wait; so high airport charges would become inevitable. Many industry observes are of the view that if the General Aviation Terminal in Lagos did not provide alternative to MAA2, BASL would have introduced monopoly charges that might stifle the airlines out of existence.
Although MAA2 was a success story, many in the industry believe that if BASL were given about five airports to manage it might not be able to effectively manage them. A source said it was wrong to rate one terminal that is being managed by a company very highly because the company might not be able to effectively manage five or more airport terminals. The source added that for uniformity and for security, it would be wrong to give out airport terminal to too many investors because it would be difficult to gauge the security system at the airport that would be private sector driven.
Part of these realities prompted Airport council International sometime ago to not that Africa remains hindered by a set of circumstances, which do not encourage external investment and these include inadequate infrastructure, high passenger charges, which are above the global average; the habitual failure of airline privatisation in Africa (with notable exceptions of Ethiopian Airlines), and the fact that African aviation industry is lagging behind the rest of the world.
While many industry observers have given FAAN red card, others believe that the problem of FAAN is the Ministry of Aviation, noting that if government could give the agency free hand to operate it would do better than it is doing now, adding that the best option would be to make the agency autonomous so that it would be insulated from interferences from the Minister, the Presidency and the Ministry.
A senior official in one of the aviation agencies said government cannot freely concession airports because of security reasons.
“Terrorism worldwide has heightened so no government would give out its airports to private investors whose soul aim is to make profits. Such individuals or organisations could compromise or close their eyes to activities of terrorists. So it is not advisable at this point in time to concession majority of the airports in the country,” the official said.
The source said to improve the airports government should set up a management team and give them targets on what should be accomplished at a given time in order to develop the airports and to stop interferences on these agencies there should be a legislation on national assets and their management which would protect them from everyday interferences from government agencies and highly placed government officials.
“Currently the industry is not doing much on manpower development. If you concession these airports they will go and bring in expatriates to manage them, thus denying Nigerians jobs. Again, these airports are seen as social services but concessionaires see it as profit making facilities, which means that if not controlled they could over charge airport users and airlines and make fares very exorbitant for average travellers,” the source said.
Government and industry stakeholders must fashion out best ways to enhance and modernise airports without compromise on safety and security.
