The recent announcement by the honorable minister of aviation that the Federal Executive Council has approved N10b to Arlington Security Nigeria Services for the automation of five international airports in the stable of Federal Airport Authority of Nigeria (FAAN), which were earlier slated for concession in his aviation road map came as a shock and surprise, considering also the company given this responsibility is a nonstarter compared to the reputable SITA organization whose contract recently ended and was not renewed.
We are all aware that the remodeling process and associated Chinese loans have gulped a lot of money that has consequently sent FAAN to the abyss of debt repayment schedule. The question boggling our mind is why will the federal government be investing billions of naira into terminals that they want to concession? FAAN needs to be supported as an organization; her problems go beyond budgetary allocation from the federal government because the organization itself lacks financial transparency. The non-availability of a verifiable financial statement, frequent changes in management and leadership of the supervising ministry over the years are other contributory factors. Even when the ministers are from the same political party they have divergent policy thrust for the organization, while implementation most times ends on the drawing board.
FAAN can survive and generate funds for the treasury if we give reputable airport companies the contract to manage FAAN for a period ranging between 5-10 years. Commercial expertise and full autonomy are required in airport management and in generating the cherished non-aviation income. One of the main reasons why BAA is seen as a model is its success in bringing the contribution of non-aviation income to about 70% of total turnover, which presently is about 25% in FAAN.
Airports the world over are seeking to increase non-aviation income. The UK experience of privatizing worked well in a matured political society after being a regulated environment for decades. In less developed countries like ours, governments should be tilting towards building and enhancing the transport system rather than just offloading the assets. This is to avoid a situation whereby we move from ugly state-owned airports to even uglier privately owned airports. It is noteworthy that most reputable private sector investors would not consider buying an airport with fewer than one million passengers.
This is why airports have often been sold as a package – good and bad, small and large, domestic and international. In achieving the objective, the government should as a first step invite reputable international airport management companies that will often achieve what governments can no longer take care of – improvements in capacity, efficiency, and safety. These private managers are internationally recognized airport operators with track records that can be sourced and verified by a click on the mouse. They will act as advisors or management consultants to the government within a limited time frame. I am not referring to the usual masquerades that form a ‘quickie’ consortium and rush to the Corporate Affairs Commission for registration and will bid and win using Padi- Padi in government. During this period the bid winner should be given free hands to manage, restructure and position the organization for a public-private partnership (PPP).
The management company will ensure compensations and adjustments are provided for all collaterals, thereafter FAAN will transmute to a public airport company with a functional board of investors, like its counterpart in South Africa, and also begin to confidently invest in airports within the sub-region and beyond. Organizations such as Intervistas, GMR, Macquarie, and Ferrovial are reputable airport management companies.
A second option is a PPP arrangement, though it has been turbulent in aviation but quite peaceful in shipping and other sectors of the economy. We must endeavor to find a lasting solution to the turbulent PPP arrangement in the industry. It is also a sad realization that all concessions associated with services provided by FAAN in the industry have been very messy, which is a reflection of the process from the beginning. Therefore, all parties must be humble enough to accept that at a point in the concession process fairness and transparency, which is the hallmark of an efficient concession process, was breached.
The concurrent favorable judgment of Bi-Courtney in court has made me come to the realization that principal personnel in FAAN and the ministry during the period this concession and others were signed, were either compromised or exhibited little knowledge of the legal booby traps in the agreement. Those involved in the processing and approval of the concession are the Bureau for Public Enterprises, Infrastructure Concession Regulatory Commission, National Council on Privatisation, Due Process Unit, Bureau for Public Procurement, Nigeria Civil Aviation Authority, and the Ministry of Aviation.
They need to get their acts together as a team and bite when necessary using requisite acts and ensuring transparency from the scratch. This may be a difficult call considering the concurrent misstep of the PPP processes in the industry, which have made the process disappointingly slow. Companies that have been badly bruised by our PPP process include Aero port Gateway, HIC, Maevis, Bi-Courtney the list goes on.
We should not despair but find that symbolic and smooth nexus between government and investors. It is usually built on project conceptualization, funding, political will, and preservation of contract. I must also point out that we are not politically matured for privatization and cannot manage it; we mismanaged the private jet issue by making it more political than safe, which is the bedrock of the industry. It would be replicated in the terminal and parking usage if we privatized. The BPE sometime in the past wanted to privatize Abuja airport; an airport that was concessioned to Aeroport Gateway and annulled a couple of months later, only to surreptitiously hand over the GAT terminal of the same airport to a private organization without due process.
Our abysmal PPP appraisal will result in a severe diplomatic backlash if we short-change a foreign organization. If we insist on the second option, which is PPP, then we should consider the clustering option whereby a major airport will be taken along with other unviable airports within the zone. This will reduce FAAN’s liability while they concentrate on regulating, monitoring, and securing the airports. Clustering takes the airport in totality rather than cherry-picking the viable airports.
Let us look at some countries and the models adopted. The Argentines took the 30 airports in totality, using funds from the viable to support the unviable ones; the Indians divided the airports into greenfield and brownfield before privatizing. To protect the public, airlines, and other airport users, the Indian government established an independent regulatory body to monitor and regulate the public and private airports. This will ensure compliance to benchmark service level and generally resist any form of monopolistic tendency. They also set up a scheme called “Viability Gap Funding”, to protect, attract and support investors for non-viable airports. The government provides funds, which can only be accessed by interested investors through a bidding process. Also, the government ensured states, where these airports are located, are not left out by providing an additional state support agreement to boost the confidence of investors, while also wielding a stick called “Liquidated Damages,” which are charged for defaults.
These countries took the airport in totality. The common factors in these agreements are capital injection, improvement of airport facilities, financial returns to the government annually, protection of public interest, and other operators. Also, the agreements were clearly stated and open to the public right from the bidding stage while the use of penalties for default or delay was specified.
Luckily some states in Nigeria have built airports without waiting for the federal government. States like Jigawa, Imo, Akwa-Ibom, Anambra, Bayelsa, etc. took the bull by the horn. It is laughable and unfair for the federal government to say they are planning to build airports or allocate funds to some states when these states can emulate their counterparts by building and sourcing investors as partners in developing an efficient airport. The federal government should rather make funds available to upgrade airports owned by them such as Ibadan, Makurdi, Sokoto, Ilorin, and Akure, considering their derelict state rather than fund the development of new airports.
We will get it right if we juxtapose these options while ruminating over our socio-economic environment. Whichever option we choose, we must take all the federally owned airports, rather than cherry-pick. We also need to take a deep breath and commend the hard-working operating staff of FAAN whose allocation comes in trickles but are forced to crack their heads, borrow money to manage airports under their watch, and maintain the new terminals that should have been bequeathed on the contractors for regular maintenance.
The problem in FAAN is bloated contract debt, political interference, and appointees that have made the organization top-heavy. It has increased its running cost, duplicated positions while they subtly run errands for their paymasters through the allocation of contracts. While waiting for the ministry to act on the way forward, they should encourage continuous improvement of airport infrastructure without recourse to public funds, which must be complemented by having vibrant flag carriers.
Therefore the government should immediately initiate a process of moving our airlines from individually owned to airlines owned by Nigerians. It’s a tonic needed for them to successfully key into public-oriented palliatives and policies.