MMA2 Terminal, Lagos
By Chinedu Eze
There have been renewed clamour for the concession of airport facilities, which is seen as panacea to the problem of funding of airport infrastructure and further development. This agitation has gained traction as government coffers shrink and as funding of airport projects is seen as luxury instead of social service, which it actually is. Again, there are private businessmen and women who may be willing to invest their money in airport facility development.
But when we look at the realities of concession in Nigeria and the peculiarities of the Nigerian environment, what will come to mind is the colossal failure of past Public, Private Partnership (PPP) in the industry. In all the efforts on PPP it is only the concession of the Murtala Muhammed International Airport Domestic Terminal (known as MMA2) to Bi-Courtney Aviation Services Limited (BASL) that has been successful.
Although the concession of Build, Operate and Transfer (BOT) was success but it was mired in controversy at the beginning and the wound the controversy opened is yet to heal. The concession could be described as a gift, which an elder gave to his protégé because the concession defied all the rules and was tailored to suit the whims of the time. But thankfully BASL made a success of it and it has become a reference point in PPP both in Nigeria and beyond.
But it would be a different scenario today if government intends to adopt concession as a system for airport development. It will establish the rules and then follow the rules. Not many investors would be enthusiastic about tying their funds in a project with long-tern deferred benefits that will come out in trickles; although BASL has maximized the benefits and gains of making huge revenue from outdoor advertising and other non-aeronautical revenue generation.
About two years ago Airport Council International (ACI) Africa deliberated on concession and PPP in Africa in a conference held in Lome, Togo.
Appraising concession in Nigeria, the then Managing Director of the Federal Airports Authority of Nigeria (FAAN) and ACI resource person, George Uriesi observed that good concessions are usually a win-win situation for the public concern and the concessionaire.
He noted that what is important is that both the airport and the concessionaire make money.
“But in Nigeria, it became a different matter. It was a situation where powerful people would look at the airport and say it would be nice to collect money from the place. They concocted arrangement that gave them critical assets through their friends in government to the detriment of the airport itself. For many years, people got away with the frauds.”
It has been said that one of the reasons why PPP failed in most parts of the third world, including India and Nigeria is because the initiators did not have clear objectives about what the PPP intended to achieve. In Nigeria experts say the country should have established legal and administrative framework before embarking on PPP and that government should have established a legal team that specialised in drawing PPP agreements for infrastructural development in the transport sector, including rail, road and even transport in the waterways.
The Director-General of ACI, Angela Gittens said then that lack of clear objectives was the major reasons why the programme failed in most parts of the third world countries.
“I think we have seen in some of the failed PPP that lack of transparent objective has been the problem whereby the community does not understand what this PPP was supposes to bring and in the long run they feel they do not succeed because it does not meet their expectations. So time and attention must be put in at the very beginning, you should not rush a PPP because it is very important to your community and the nation and it is good you take the time to do it properly.”
Gittens and other speakers on PPP stressed that concession agreements must take cognisance of the dynamism in the industry and suggested that such agreement usually leave room for evaluation after an interlude of about five years. The objective of the evaluation is to ensure that the contract still meets the set targets it was meant to actualise and if there is need for adjustment because of the changes that might have taken place since the contract was signed or even termination of the agreement as it does not fit in with the current trends in the sector.
“You also have to recognise that condition changes because this is a very dynamic industry so any PPP has to be dynamic and has to allow for change, including termination by one party or the other when expectation are not meant over the long term because you don’t expect everything to be the same in 25 years as they will in year one.
You should just be honest and open about that it doesn’t has to be anyone’s fault. It doesn’t mean you had a bad investor, it doesn’t mean the owner did anything wrong but sometime things change and this kind of arrangement must be made so that things can change as well for the benefit of the community,” Gittens said.
Demerits of Concession
Although concession looks like a panacea to airport funding and development but there are disadvantages of concession, 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 terminals 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 note 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 modernize airports without compromise on safety and security.
