Nigeria Air Doomed From The Start

For a die-hard supporter of Nigeria Air, NA, I must express fear that the announcement of a successful bid by Ethiopian Airlines, perhaps the most successful in Africa, leaves me with a sad dilemma.

On the one hand, I should be happy that indeed a national airline capable of, among other things, earning foreign exchange, is about to take off. On the other hand, I am sad because it is obvious that Mr Hadi Sirika, in a bid to leave a “legacy” has contrived an arrangement which the next government (unless APC) will scrap as soon as possible.

If Nigeria Air starts operations before May next year, it must be because the Federal Government has allowed its Minister to indulge in abuse of power to such degree as to endanger the business.

When Mr Hadi Sirika announced two weeks ago that Ethiopian Airlines was the sole foreign bidder, which also met all the conditions set out for the exercise, he also revealed that the new airline will take off before December.

There were so many important issues which have not been settled; and which will make the target date appear like another one of the Minister’s pipe-dreams. That is sad; given the importance some of us attach to the need for us to have our own flag carrier.

It is humiliating enough that it is “small” Ethiopia which is bailing out the Giant of Africa. It will be very embarrassing if the deal falls through at the end of the day. And, the chances are extremely high that we are into another airline deal like VirginNigeria which blew up in our faces.

COMMENCEMENT DATE AND THE PROBLEMS AHEAD

“National Airline takes off in few weeks with three aircraft.” .

I read the report, which appeared in several national newspapers, in order to convince myself that it was not fake news. They all reported that the bid had been closed and Ethiopian Airlines, EA, would be holding 49 per cent of NA’s shares, while a consortium of Nigerian investors would have 46 per cent; and the FGN, FGN, would have 5 per cent to ensure that Nigerians, at least in the beginning, hold a slim majority of the shares.

The announcement made no mention of the total share capital to enable readers know exactly how much all the stakeholders, especially EA, are expected to kick into the venture. For that matter, we don’t know if the EA is expected to pay in foreign currency or not.

But, the first oddities that must strike anyone who has ever been involved in any new business venture are also the issues that might also lead to NA crash-landing in a short while – that is, apart from the likelihood that a new FGN might scuttle the whole thing. First, the idea of a 5 per cent stakeholder taking fundamental decisions about the company, without reference to the holders of 95 per cent stake is an absurdity which only the Ministry of Aviation alone can understand.

For instance, the resumption date, the type of aircraft to use, senior staff selection, operational policy, marketing, procedures, banks, board composition – among others – have never been decided by a minority shareholder. Meanwhile, it is an established fact that the Ministry must send a report of the bidding process to the Federal Executive Council, FEC, for final approval after the closure.

It is never guaranteed that the FEC will approve the selection – even when there is one bidder. On many occasions in the past, the FGN had turned down a Ministry’s recommendations and ordered the exercise to be repeated. Quite often, this has occurred when one of the rejected bidders raises a fundamental objection regarding the integrity of the selection process. Despite the presumed closeness of Mr. Hadi to Buhari, due process demands that the Minister must wait until the approval is given to move forward.

Instead of applying caution on this vital matter, the Minister is moving recklessly to get NA started at all costs before he leaves office. But, whether he likes it or not, there are several issues to be settled before NA can take to the air.

In a brazen demonstration of abuse of power, Hadi had brow-beaten all the agencies – FAAN, Civil Aviation Board etc –under his Ministry to shorten the time usually required to conduct due diligence and obtain certain approvals.

Two vital issues, among others, will help readers to fully understand how NA might be flying into a storm; and perhaps a crash: 1. Memorandum and Articles of Association and 2. Insurance. Let me discuss both briefly.

MEMORANDUM AND ARTICLES OF ASSOCIATION, MAOA.

“It is the document that regulates the company’s external affairs, and compliments the articles of ASSOCIATION which cover the company’s internal  organisation, objectives, capital  etc, in short the two form the constitution of the company – irrespective of whether it is a limited liability company or a Plc.”

For purposes of this article, this is the working definition. Hadi might have been able to bully the MDAs under him to rush approvals, but, he will soon discover that the airline cannot fly without the proposed company being registered with the Corporate Affairs Commission, CAC, which have a lot of questions to ask and which must be answered satisfactorily.

For instance: how many board members will be appointed? Who will nominate and appoint them? Will the Chairman of the Board of Directors or Managing Director always be appointed by Ethiopian Airlines (being the largest stakeholder); or will those important positions be rotated, when and how often? Who will be signatories to accounts and what are the limits of their authorities for approval? What will be the organisation structure? Who can employ and fire people? What is the intended capital structure to start?? Etc, etc,

Because of the very nature of Nigeria Air, with one investor holding 49 per cent, several others holding 46 per cent and the FG having only 5 per cent, the document, which will require several months to be ready, and the draft of which must be approved by all the stakeholders, can never be left to the FG – which is the smallest party. Billions of dollars and Naira are at stake; and nobody, except the FG can afford to make a mistake.

Nothing on earth Hadi does will stampede the other shareholders into signing a document which does not adequately protect their interests. If it takes ten months to get it, so be it. That is what makes the promise of starting in a few weeks so frightening. The Memorandum is not something the Ministry has prepared in advance and ready to be distributed to other parties. In fact, if there is already such a document before September 23, 2022, then it must be fraudulent.

NA cannot even operate bank accounts, get registered by the Securities and Exchange Commission, SEC, CBN, Security agencies, as well as other bodies without registration by CAC. To the best of myknowledge, there is no application pending from NA. So, how can it start flying in a few weeks?

INSURANCE

“You don’t appreciate the value of insurance until you have a serious accident.”

That was how an insurance salesman got me to buy life insurance. The attack on the World Trade Centre in New York on September 11, 2001 opened our eyes to the fact that planes are also flying bombs. In Nigeria, the DANA AIR plane which ploughed into buildings in Ikeja, reminded us that we are always at risk. Fortunately for all of us, global practices make it mandatory for airlines to carry insurance before sending those bombs up. Nigeria Air cannot legally fly without necessary insurance. They can’t insure unless there is a registered company. That won’t happen in a few weeks. End of story.

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