Concession as Panacea for Airport Infrastructure Decay

As government faces the challenge of providing social services amid other competing needs, the private sector could take over the renewal of airport facilities through concessions, writes Chinedu Eze

The solution to the decay and poor rating of airport facilities could lie with government’s decision to introduce concession as permanent policy in airport infrastructure renewal and modernization.

This means that that government has to rejig its Civil Aviation Regulation and establish legal and administrative frameworks to ensure efficient concession arrangements that will serve the purpose, benefit airport users and investors.

Such efforts in the past gave birth to controversies, because government, over the years had been ambivalent and continued to prevaricate over the decision to adopt concession as a policy.

The few efforts in the past were made at the whims of a particular government or another; that was why such efforts were whelped in controversies. But if government adopts it as a policy, its agency, the Federal Airports Authority of Nigeria (FAAN) would take cognizance of the rule and become more of a regulator and enforcer; although it would still be in control of security, marshaling and runway management.

With concise policy on concession and well guided concession of airport facilities, government would no more be bordered by funding of airport infrastructure; it would now have to contend with other social services like provision of health, education and others. At the same time, the airports would have efficient facilities; they would become customer oriented and also yield revenue to government.

This may be the way to go if government must fully exploit the full potential in air travel and reap the benefits therein. It would also create more employment for Nigerians and make Nigerian airports competitive in Africa and in the world.

Former managing directors of FAAN, George Uriesi and Richard Aisuebeogun, acknowledged that the solution to infrastructure decay at airports is concession. But they emphasized that such concession must be done transparently and with good intention to make the airports better but not as compensation for political loyalty, so the facilities must be given out in concession to the organizations that will efficiently manage them and also enhance passenger facilitation and satisfaction.

With concession, the private sector would be made to take over. But that would depend on how quickly government could legislate the concession process through the National Assembly.

It is obvious that government would be wary at privatizing the airports as many in the industry insist that Nigeria is not mature to privatize its airport facilities. They also look at the issue of security and aver that privatised airport with full private sector control could be exposed to danger because of possible insider threat and betrayal of the nation’s interest.

At the morning programme of the Nigeria Television Authority on Tuesday morning this week, the former Managing Director of the Nigerian Airspace Management Agency (NAMA) and presently the CEO of Top Brass Aviation, Captain Roland Iyayi said that the best option for Nigeria is to concession the airports and suggested that the airports could be concessioned in a way that every concessionaire could be given five airport terminals to manage and in that way the airports would be given to concessionaires.

Iyayi also suggested that the concessionaires must be reputed international airport managers, adding that the concession must follow transparent, outlined process as obtained on other parts of the world. According to him, FAAN should be unbundled and made to regulate the industry because as the agency is now, it has outlived its usefulness.

Iyayi said that concession could attract private equity into the country now that it is obvious that government cannot afford to fund renewal of airport infrastructure to meet acceptable international standard, remarking that with sincere commitment to concession, government could attract foreign investors that would bring money into the country.

Also industry consultant and CEO of Belujane Konsult, Chris Aligbe who contributed during the programme spoke in the same vein and said there is the need to concession the airports, remarking that a concessionaire would be more creative in exploiting non-aeronautical ways to generate revenue instead of the present situation where about 75 per cent of the revenues generated by FAAN comes from aeronautical sources while only about 22 per cent comes from non-aeronautical sources. This is contrary to what is obtained in other parts of the world with developed air transport service where airport managers rely more on non-aeronautical than aeronautical revenue sources.

Aligbe observed that one of the reasons why airlines collapse in Nigeria is because of too many charges leveled on them by the aviation agencies. He noted that if FAAN fully exploited non-aeronautical revenue sources, it would have reviewed downwards the charges paid by the airlines.

The consultant also emphasised that government would have to legislate the concession process with defined laws guiding it because “anybody who wants to invest would like to see the laws guiding the process, including the legal, administrative and regulatory frameworks.”

Iyayi said the Murtala Muhammed Airport Domestic Terminal (MMA2) has remained the best airport terminal since it opened in 2007 and it is because it was built and being managed by a private investor, Bi-Courtney Aviation Services Limited (BASL). The airport generates over 80 per cent of its revenues from non-aeronautical sources and it is the most technology driven airport terminal in Nigeria.

Many industry observers believe that MMA2 typifies what an airport terminal should be and wish that the international terminals would reflect the efficiency and facility upgrade at the domestic terminal.

Aligbe also said that MMA2 has epitomised what a terminal would be and that was because it was concessioned. He noted that Bi-Courtney has set a standard for any private investor that wished to invest in airport facility development. Many industry observers also gave kudos to Bi-Courtney for taking up the courage to invest in airport facility development, thus pioneering the private sector effort towards airport development.

Former Managing Director of FAAN, Aisuebeogun observed that government should gradually begin to hand over to the private sector to develop the airports.

“Personally, I do think airports management should start undergoing a gradual phase of transferring from government to private hands. First, it should be through a process of commercialisation; then privatisation. There should be rigorous pursuance of complete multi-modalism in our airports. This makes them the hub of domestic transport. Besides, international transit systems in Nigeria are still far from seamless. This needs careful planning and deliberate tuning.

“Let me also add that airport provides access to and interlink regional, national and international markets. This makes investment in existing or new airport infrastructure essential to economic development.

Aisuebeogun said traditionally, airport were owned, managed and operated by government, but increasingly, there has been a global shift towards private sector involvement with varying degree of private ownership and responsibilities, including the use of public private partnership models. In other words, government should begin to see the need to share the risk of growth with private partners.

He said this has been done successfully in UK with Global Infrastructure Partners (GIP) a private enterprise based in New York; USA led by a Nigeria Business Man Dr Adebanjo Ogunlesi acquiring a major stake at £1.5 billion from British Airport Authority (BAA) and thereby own London Gatwick Airport (LGW). He has since gone further to acquire 50 per cent of American International Group Stake in London City Airport and Edinburg Airport in 2012.

Many industry observers are also of the view that Bi-Courtney has got the experience having built and is managing an airport terminal since 2007 and that terminal obviously is the most efficient and in terms of aesthetics is the best in the country. Besides, the terminal has epitomised non-aeronautical revenue sources, which has remained the mainstay of its sustenance. Although many industry analysts talk about bringing investors from outside the country, but before Bi-Courtney ventured into airport management, investors had not shown much enthusiasm about investing in airport facility development. So when it comes to indigenous participation in airport development BASL takes prime position and although analysts always talk about foreign investors but experience has shown that it is when the indigenes begin to invest in their country that outsiders would be encouraged to come in. the Managing Director of Medview Airline, Alhaji Muneer Bankole insists that government should make extra effort to encourage indigenous participation in airport development.

The Managing Director of BASL, Christophe Penninck said in interview he granted to THISDAY that the secret of the success of MAA2 is that the management is  always wanting to know what the customers want and also work in tandem with world’s best practices.

“So what we did is to ask, what do customers want? And how can we derive revenue and profit out of their needs? And the best way to go about it is to attract shops to the airport. Unfortunately we have limited land but within the land that we have we have been quite innovative and thinking outside the box.

Penninck said for Nigeria to build world standard airports, it must engage the private sector.

“Aviation is not Nigerian; aviation is not even Africa; aviation is global. So what we have to do is to look at the global standards. When international airlines fly to Lagos they will expect the same level of safety, security, operational quality service delivery as when they fly to New York, Amsterdam, Brussels or Singapore. Let us use Singapore as an example; the Singapore way is the way Nigeria should go. Don’t forget Nigeria has the largest population in Africa; that is a fact. There are very few things I think personally that Nigerians cannot do compared to the rest of the world.

You have everything in Nigeria, so let’s take out the element that says Nigeria is a different standard; I think we should say that Nigeria should look at global standards and the quality that is giving at other airports. So if we now agree that Nigeria should look at global standards, let’s look at what is the best practice. And to me, the best practice is privatisation. You can have privatisation with the participation of the government,” he said.

The economic situation in Nigeria; the challenges before government have made it inevitable that government should divest some responsibilities that could be handled by the private sector in a win-win situation. In the aviation industry engaging the private sector has become the vogue in the world.