FG suspends national carrier project indefinitely

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The Federal Government has suspended the planned commencement of operations of Nigeria Air.

Although no reason was given for the suspension, it was gathered that the national carrier project had been put on hold in the interim.

The Federal Government, through its Ministry of Transportation, the Aviation arm, had announced in July that Nigeria Air would commence operation before the end of this year.

But in a tweet on Wednesday, the Minister of State for Aviation, Hadi Sirika, stated that the project had been suspended.

“I regret to announce that the Federal Executive Council has taken the tough decision to suspend the national carrier project in the interim. All commitments due will be honoured. We thank the public for the support as always,” he tweeted.

On July 18 this year, the Federal Government unveiled the branding and livery for Nigeria Air and stated that the carrier would be inaugurated at the end of the year.

Sirika unveiled the proposed carrier’s branding and livery at a press conference during the Farnborough Air Show in London, United Kingdom.

“I am confident that we will have a well-run national flag carrier that is a global player, compliant with international safety standards and one which has the customer at its heart,” Sirika had stated then.

But on Wednesday, the minister stated, “Today in council, the Federal Government of Nigeria has decided to suspend the national carrier project for some strategic reasons and we will advise you in due course.”

Operators in the aviation sector and other industry observers had expressed doubt over the planned national carrier, as they criticised some of the measures adopted by the government in driving the process.

But the Federal Government argued that its measures were formidable, as it would provide $55m upfront grant in order to ensure the take-off of the airline this year.

It also clarified that it was not paying $300m for a five per cent stake in the airline, adding that the amount was the entire cash flow funding requirement of the carrier for a three-year period.

Responding to social media questions raised about the national carrier, Sirika had explained that the funding requirements for the airline were in stages.

He said, “$8m represents start-up capital for offices, etc. that is required for take-off. But $300m is the entire airline cash flow funding requirements (aircraft, operations and working capital) for three years (2018, 2019 and 2020). This funding can be in the form of equity or debt. The financial model estimates cash flow requirements as follows: 2018, $55m – $8m is included here; 2019, $100m; and 2020, $145m.

“In order to ensure the take-off of the airline in 2018, government will provide $55m upfront in grant/viability gap funding to finance start-up capital and pay commitment fees for aircraft to be leased for initial operations and deposit for new aircraft, whose delivery will begin in 2021.

“The remaining financial injection by government will be determined by the quantum of equity that the strategic equity partner will bring as a result of the PPP (public private partnership) competitive bidding process. This explanation clearly debunks the claim in the social media that government is paying $300m for a five per cent equity share.”

 

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