By Sade Williams/Business a.m.
-
Nigeria Air to launch with three aircraft
-
Government to own only 5%
-
MRS, SAHCO, Nigerian Sovereign Wealth Fund own 46%
Nigeria on Friday named Africa’s top airline, Ethiopian Airlines, as bid winner for 49 percent equity ownership of its planned new national carrier, Nigeria Air. It makes the multi-award winning carrier the core investor in the airline which the government says it will keep only five percent of the equity.
The announcement, which was made by the Nigerian government through its Ministry of Aviation, also disclosed that a consortium of three Nigerian investors, namely MRS, Skypower Aviation Handling Company Plc (SAHCO) and the Nigerian Sovereign Fund will own 46 percent equity in the new airline.
Hadi Sirika, the minister of aviation, told journalists in Abuja at the weekend that the airline will be launched shortly with three Boeing 737-800 in a configuration very suitable for the Nigerian market.
“The national carrier, Nigeria Air, is well on its way to being launched with three Boeing 737-800 in a configuration very suitable for the Nigerian market.
“Nigeria Air will launch with a shuttle service between Abuja and Lagos to establish a new comfortable, reliable and affordable travel between these two major Nigerian airports. Other domestic destinations will follow thereafter.
“The Request for Proposal (RFP) under the Public Private Partnership (PPP) Act, governed by the Infrastructure Concession Regulatory Commission (ICRC), is completed. After a careful, detailed and ICRC governed selection process, Ethiopian Airlines (ET) Consortium has been selected as preferred bidder, offering an owner consortium of three Nigerian investors, MRS, SAHCO and the Nigerian Sovereign Fund (46%), FGN owning 5% and ET 49%.
“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,” Sirika said.
An interim executive team of highly skilled aviation experts has been working since February 2022 to set up all the necessary regulatory and industry requirements to launch the national carrier, the minister further disclosed, adding that all the executives have been approved by the Nigerian Civil Aviation Authority (NCAA).
He said the Air Transport Licence has been issued by NCAA, while Nigeria Air, after identifying the first three aircraft, will now finalise all necessary Operation Manuals and then go through the inspection and approval process of NCAA.
“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% capital investment of the Federal Government of Nigeria, that 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 Federal Executive Council (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. It is the overall share capital of around $300 Million USD, 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,” Sirika explained.
Background on the PPP
The invitation to bid for the ownership of Nigeria Air under the PPP regulations of the Federal Government of Nigeria (FGN) and overseen by the Infrastructure Concession Regulatory Commission (ICRC) was published in the Economist and in several local Nigerian papers on 5th March 2022 with a deadline for the Request for Proposal (RFP) set for 10th May, 2022, later extended to 10th June, 2022, with another publication in Nigerian local papers. 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 15th March 2022. This data room is a reflection of how transparent the PPP process and the RFP procedure were handled. A bidders conference was held online on 28th March, 2022 with over 100 participants.
“Over 60 parties requested access to the data room. On 10th June, 2022, the Ministry received on time one closed bid by the Ethiopian Airline Consortium. 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 evaluation team, 11 experts from ICRC, FMFB&NP, FMA and the TA met on 20/21st July 2022 and again on 1st August 2022. 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.”
Sirika noted that the financial bid was opened under the observation of the Ethiopian representative on 21st July 2022, noting that all 10 forms, as required by the RFP, were evaluated by the team.
He said the assessment team unanimously cleared the technical bid, which had a total score of 89 percent out of 100.
“In a further meeting on 1st August, 2022, the team assessed the financial bid further and graded it with a score of 15 out of 20. The Ethiopian Airline consortium got a combined score (technical and financial bid) of 86.7 percent. The Ethiopian Airline consortium was declared the preferred bidder and 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. We aim to finish this PPP process by mid Nov. 2022,” the minister added.
