Ethiopian Airlines emerges core investor in Nigeria Air with 49% shareholding

• The federal government will control five per cent equity while a consortium of MRS, SAHCO and the Nigerian Sovereign Fund will have 46 per cent.

Ethiopian Airlines is the preferred bidder for Nigeria Air, the Nigerian government said Friday, as it prepares for the commencement of operations of Nigeria’s new national carrier.

Aviation Minister Hadi Sirika said at a press briefing in Abuja that Nigeria Air will launch with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between the two major airports and that other domestic destinations will follow thereafter.

Ethiopian Airlines will own 49 per cent equity, the federal government will control five per cent equity, while a consortium of three Nigerian investors (MRS, SAHCO and the Nigerian Sovereign Fund) will have 46 per cent, Mr Sirika said;

“After a careful, detailed and ICRC governed selection process, Ethiopian Airlines (ET) Consortium has been selected as preferred bidder, offering an owner consortium of 3 Nigerian investors MRS, SAHCO and the Nigerian Sovereign Fund (46%), FGN owning 5% and ET 49%.”

“National Carrier– Nigeria Air”

Nigeria Air is the nation’s proposed national carrier which was unveiled at the Farnborough Air Show in England on July 18, 2018.

The project was suspended two months after it was announced after critics raised concerns over its relevance and sustainability. The proposed airline was expected to gulp $8.8 million preliminary cost and $300 million as takeoff cost.

Nigeria’s defunct carrier, Nigeria Airways, collapsed due to corruption and poor management.

But the Nigerian government dismissed all concerns raised, saying the airline would begin operation before the end of 2018, following President Muhammadu Buhari’s promise to establish a national airline during his 2015 electioneering campaign.

In July, the Federal Executive Council approved the leasing of three aircraft to enable the airline commence operations on a date to be announced soon by the government.

Many Nigerians are still suspicious of the plan to launch a national carrier, partly with public funds, at a time the government is struggling to fund other essential services.

Ongoing preparation

The minister said Nigeria Air is well on its way to being launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market.

“The Request for Proposal (RFP) under the PPP act, governed by ICRC, is completed.”

He said the consortium has been subject to a due diligence process, after which the contract will be negotiated between the consortium and the FGN, leading to a Full Business Case, which will be expected to be approved by the Federal Executive Council (FEC).

“We expect this process to take 6-8 weeks,” the statement said.

It said an interim executive team of highly skilled aviation experts has been working since February to set up all the necessary regulatory and industry requirements to launch the national carrier.

“All Executives have been approved by NCAA, the Air Transport License has been issued by NCAA, Nigeria Air (after having identified the first three aircraft) will now finalize all necessary Operation Manuals and then go through the inspection and approval process of NCAA.”

Seed capital

Mr Sirika explained that the money spent for the launch of Nigeria Air, for all the requirements to establish an AOC and be admitted to starting an airline operation, is well within the 5 per cent capital investment of the Federal Government of Nigeria.

This, he said, will be the overall needed to establish the National Carrier initially for the AOC approval and everything else required by stringent national aviation regulations, as prescribed in the FEC approved Outline Business Case (OBC).

“This OBC is the milestone for the preferred Bidder Consortium and has been met by the submitted business plan of the preferred bidder.”

The Minister said “It is the overall share capital of around $300 million provided by the preferred bidder that will launch Nigeria Air to its full size of 30 aircraft and international operation within the next two years.

“No further FGN funding will be provided above the 5% share capital of the next national Carrier of Nigeria, which was provided to launch Nigeria Air,” Mr Sirika said.

Bidding process

According to the statement, invitation to bid for the ownership of Nigeria Air under the Public-Private Partnership (PPP) regulations of the Federal Government of Nigeria and overseen by the Infrastructure Concession Regulatory Commission (ICRC) was published in the Economist and in several local Nigerian papers on March 5, with a deadline for the Request for Proposal (RFP) set for May 10, but was later extended to June 10.

It said a data room for all the details of Nigeria Air, including the Outline Business Case (OBC) and the financial model, was established by the Transaction Advisor on March 15.

“This data room is a reflection of how transparent the PPP process and the RFP procedure were handled.”

The statement noted that a bidders conference was held online on March 28, with over 100 participants and that over 60 parties requested access to the data room.

On June 10, it said the Ministry received on time one closed bid by the Ethiopian Airline Consortium, the statement pointed out;

“Few others attempted to submit, but unfortunately could not meet the deadline. Since we did not collect the bids, we are not in a position to say who they are.”

The Aviation ministry said the evaluation team for the process comprised 11 experts from ICRC, FMFB & NP, FMA and that the TA met on July 20 and 21, and again on August 1.

It said, “The Ethiopian Airline Consortium bid was formally opened in the presence of a representative of Ethiopian Airlines, checking that all envelopes were closed and sealed at that point, 11am on 20th July, starting with the Technical Bid.”

The Financial Bid was opened, again under the observation of the Ethiopian representative, on July 21, the statement said.

It said all 10 forms, as required by the RFP, were evaluated by the team and that unanimously, the assessment team cleared the Technical Bid, which had a total score of 89 per cent out of 100.

In a further meeting on August 1, the statement said the team assessed the Financial Bid further and graded it with a score of 15 per cent out of 20.

“The Ethiopian Airline Consortium got a combined score (Technical and Financial Bid) of 86.7%.”

The Minister said the Ethiopian Airline Consortium was declared the preferred bidder and that the evaluation team will proceed with the; Due diligence phase (completed for all consortium partners on 15 Sep. 2022); Contract negotiation between the preferred bidder and FGN; Development of the Full Business Case (FBC); Issuance of compliance certificate for the FBC by ICRC and Approval of FBC by FEC, the minister added;

“We aim to finish this PPP process by mid Nov. 2022.”

Source Premium Times