The chosen bidder for shares in the new Nigerian airline, Nigeria Air is a consortium led by Ethiopian Airlines, the nation’s aviation minister, announced Friday, 23 September 2022.
One of President Muhammadu Buhari’s campaign pledges in the 2015 election was for the airline to be privatised and relaunched.
In the deal, Ethiopian Airlines will own 49% of the new airline, the Nigerian Sovereign Fund 46%, and the Nigerian federal government 5%.
- Ethiopian Airlines will own 49% of the new airline, the Nigerian Sovereign Fund 46%, and the Nigerian federal government 5%
- Nigeria Air will have a US$300 million initial capital and 30 aircraft by the end of four years
- Nigeria Airways, the former national airline of the most populous nation in Africa, was established in 1958 and is entirely possessed by the executive branch. In 2003, it stopped being used
“Ethiopian Airlines (ET) Coalition has been chosen as the preferred tenderer, offering an owner consortium of three Nigerian investors SAHCO, MRS, and the Nigerian Sovereign Fund (46%), with FGN owning 5% and ET 49%,” Mr Sirika was cited as saying in the announcement.
Hadi Sirika, the Minister of Aviation, told reporters that the Buhari cabinet was expected to approve the shareholding proposal in the following weeks. According to him, Nigeria Air would have a US$300 million initial capital and 30 aircraft by the end of four years.
Nigeria Air will begin by offering service between Abuja, the nation’s capital, and Lagos, its commercial hub, and will eventually add other routes. The airline will be allowed to purchase up to 30 aircraft between the third and fourth year, according to Sirika. “We are planning to initially bring in six Boeing 737 aircraft,” he said.
The ICRC-mandated Request for Proposal (RFP) under the PPP Act is finished. He said the contract would be negotiated between the consortium and the FGN following the due diligence. This will result in an entire business case, which is anticipated to be approved by the Federal Executive Council (FEC).
The statement read, “We anticipate this procedure to take 6-8 weeks.”
He continued that Nigeria Air is a private limited firm that won’t be affected by the government.
To become a centre for West Africa, Nigeria has been working to establish a national airline and improve its aviation infrastructure, which is currently considered a hindrance to economic growth.
Nigeria Airways, the former national airline of the most populous nation in Africa, was established in 1958 and is entirely possessed by the executive branch but ceased operation in 2003.
Two months after it was launched, the initiative was put on hold because of criticism regarding its viability and relevancy. A preliminary cost of US$8.8 million and a takeoff cost of $300 million were anticipated for the projected airline.
Nigeria Airways, a defunct airline in Nigeria, failed due to management corruption.
The Nigerian government said the airline would launch operations before the end of 2018, fulfilling President Muhammadu Buhari’s pledge in his 2015 election campaign to create a national airline.
The Federal Executive Council (FEC) approved leasing three aircraft in July, allowing the airline to launch operations on a soon-to-be-announced date.
When the government is having trouble paying for other crucial services, many Nigerians remain sceptical of the plan to start a national carrier, which would use a portion of public cash.
According to Sirika, the money used to launch Nigeria Air, fulfil all AOC criteria, and gain approval to operate an airline business is well within the Federal Government of Nigeria’s 5% capital contribution.
According to the FEC-approved Outline Business Case, this will be the total needed to establish the National Carrier first for the AOC approval and everything else required by strict national aviation requirements (OBC).
“This OBC is the milestone for the chosen Bidder Consortium and has been reached by the preferred bidder’s submitted business plan,” he said.
The Minister stated, “It is the selected bidder’s entire share capital of roughly US$300 million that Within the following two years, Nigeria Air will expand to 30 aircraft and begin international operations.”
“No additional FGN investment will be allocated above the 5% share capital of Nigeria’s future national carrier, which was provided to launch Nigeria Air,” Sirika stated.
The bidding procedure
According to the statement, an invitation to bid for the ownership of Nigeria Air under the Federal Government of Nigeria’s Public-Private Partnership (PPP) regulations, overseen by the Infrastructure Concession Regulatory Commission (ICRC),
Published on March 5 in the Economist and several local Nigerian papers, with a deadline for the Request for Proposal (RFP) set for May 10 2022, but was later extended to June 10 2022.
On March 15, the Transaction Advisor built a data repository for all Nigeria Air facts, including the Outline Business Case (OBC) and financial model.
“This data room reflects how open the PPP and RFP procedures were conducted,” it claimed.
According to the statement, an online bidders conference was held on March 28 with over 100 participants, and over 60 parties requested access to the data room.
On June 10 2022, the Ministry received one closed proposal from the Ethiopian Airline Consortium on time.
Several others tried to submit but could not reach the deadline.” We are unable to identify them because we did not gather the bids,” the statement read.
According to the Aviation Ministry, the evaluation team for the procedure consisted of 11 specialists from the ICRC, FMFB & NP, and FMA. The TA convened on July 20 and 21 and on August 1.
Ethiopian Airlines’ profit hits US$937 million in 2022
While other African airlines are facing financial challenges due to difficult operating situations, Ethiopian Airlines has maintained to function successfully.
The airline recorded a 79% increase in revenue for the fiscal year that ended July 30 2022, despite a 90% increase in profit. According to Mamo Mihretu, CEO of Ethiopian Investment Holdings, this information is correct.
Mr Mihretu claims that the state-owned airline “This fiscal year, the company generated US$5 billion in revenue, a 79% increase over the previous year.
Despite the headwinds of a worsening global economic outlook, higher gasoline costs, and a global pandemic, profit increased by 90% to $937 million.”