Virgin Nigeria (VNA) SAGA: BETWEEN THE LETTER AND MMU

(article written August 2008)


The Virgin group is worth over $ 30 billion with over 65 subsidiaries and ancillary companies’ world wide. Virgin Airline siblings are spread over eight countries, namely Nigeria’s Virgin Nigeria, Belgium’s SN Brussels (merger between Virgin Express & Brussels Airline),America’s Virgin America, Malaysia’s Air Asia X (20% interest),Australia’s Virgin Blue & V Australia, New Zealand’s Pacific Blue and Samoa’s Polynesian Blue. This article will look at the relocation order and other attributes of the virgin siblings in other countries.


VNA came into the country at a very trying period for the country’s civil aviation; the government had just liquidated Nigeria Airways and tried unsuccessfully to start another carrier despite the efforts and funds spent in creating, branding, repainting and even deceiving the Miss World organizers of a new national carrier called Air Nigeria or Nigeria Air International.

The gimmicks, plan and programme of government for the new airline fell flat, that the advisors to government on the best option, International Monetary Fund had to return the consulting fee before pulling out in disappointment. The government was faced with the option of propping up our local airlines or starting another national carrier. they chose the latter, and invited Virgin to start a flag carrier just like the Samoan government invited Virgin which led to the formation of Polynesian Blue in place of the failed national carrier; Polynesian airlines. Also the entry of VNA was the fill the vacuum created by the demise of Nigeria Airways which Virgin also did in Australia with Virgin Blue at the demise of a mega carrier Ansett Airline.

The government announced to the nation Virgin is the new core investor in the new wholly privatized national carrier despite the protestation of United States who alleged that Virgin was the blocking US airline’s access to Heathrow. Virgin was to replace South Africa Airways (SAA) who had won the bid as the core investor in a process initiated and cut-short by the same government, at that time SAA was facilitating the operation of Nigeria Airways flight to New-York via Dakar using the 7th freedom rights from Lagos with a South African registered B747 aircraft.

Virgin Group initially only wanted a share of British Airways big cake which necessitated the lobbying for sometime to partner with Nigeria Airways on the Lagos- London route (only) or the relinquishing some of WT juicy but under-utilized frequencies into Heathrow airport. When that failed, they were able to convince the government showing records of fares crashing at the name of “Virgin”, which was very convincing, that the government, started the push for dual designation on the LOS-LON route when the country was not willing and did not designate a second airline to reciprocate that agreement.

The reasons given by virgin for their interest was the unbridled profit, arbitrary fares and appalling customer service of British Airways who were the de-facto monopolist on the route, though on record today the cheapest fare on that route is not VNA or VAL but another local operator. Looking at the fares advertised recently you will be surprised the fare gimmick that was sold to the government years ago is a mirage because today BA has $1445 to London as against VS $1444 while BA one way fare is $1172, VS is $1460 (see skyworld travels).

On related issues such as Singapore Airlines pulling out of Virgin Airline group, which is being attributed to the losses in VNA. This is not a fair assessment of the move. SIA acquired 49% of Virgin Atlantic Airways in March 2000 for £600 million; SIA started mooting the idea of selling its stake after the Singaporean government signed a new agreement with the British government. The agreement removes all restrictions on flights operated by airlines of both countries which includes beyond and domestic rights in the UK. The deal was reached almost two decades after Singapore first proposed it. Now SIA has free access to the North Atlantic from UK, which was the reason for investing in Virgin initially. The benefits far outweigh the investment in Virgin Atlantic which is a perception that SIA has not denied.

VNA losses that is being made an issue now, is not a Nigerian factor as airlines all over the world are having a trying period, with as many as 25 airlines filling for bankruptcy, the latest being Zoom Airline. When an airline starts from the scratch like VNA rather than partner with an existing airline you can be sure it will be rough, to tag VNA as the only red paper in the group will be tantamount to twisting fact. Virgin Blue is presently being dogged by a doomsday prediction that has equally affected its share price in Australia while Virgin America made $35 million loss in the first quarter of its operation alone. Virgin Express had to merge with SN Brussels in Belgium just to halt the financial hemorrhage due to a shrinking market and the aerial raid from Ryan air and Easy jet.

The Virgin vs. FG headline that heralded the relocation order was a creation of the media, when in reality VNA was initially over pampered and treated like an “heir apparent” by the government. The parent and technical partner (Virgin group) has a history, right from formation to always speak out on issues relating to the industry and primarily to those that affect its interest. Here are some examples: London Air Traffic Distribution Rules: the rules were designed to achieve a "fairer" distribution of traffic between London Heathrow and London Gatwick, the UK's two main international gateway airports, while Virgin fought for its implementation BA barked against it because it will give Virgin and other UK airlines access to the London airports, Virgin won.


Virgin also appealed against a decision by the US Dept. of Transportation's Office of Airline Information denying its request for confidential treatment of its financial, traffic and origin&destination information while other airlines made their reports open. The appeal is pending the other airlines led by Republic airlines are very furious with DOT for treating Virgin America with kid gloves. The group is also, presently opposing the impending alliance between the BA, Iberia and AA which they termed Anti-competitive, by writing to authorities in the US and the presidential candidates in particular, not to approve it.


It is imperative to state here, that it is not only the Nigerian Government that has put his foot down on issues bordering on state security and the economy, the United State Government through the department of transportation (DOT) also issued some guideline before granting Virgin America an air operating certificate(AOC) and Virgin complied. DOT requested a change in its business structure by enacting several reforms. In order to achieve the necessary approval while Virgin America proposed a restructuring of the airline. Voting shares would be held by a DOT-approved trust and only two Virgin Group directors would be on the eight-person board.

In addition, Virgin America offered to remove Richard Branson from the board, and possibly even dropping the “Virgin” brand entirely. The airline was also prepared to remove CEO Fred Reid “should the DOT find that necessary”. Quoting Virgin America spokesman Gareth Edmonson-Jones “While we disagree with this tentative order, we respect the department's decision and intend to use the order as a roadmap to address the issues and to demonstrate ... that Virgin America will meet all ownership and control requirements," he said.

Also sometime in 1986, BAA the operators of London Airports where liable for delays and cancellations of flights by British operators. The operators were upset and were contemplating different actions which were championed by Ryan Air but Virgin’s position was, "We prefer to have a cozy chat with the government, about how any costs can be clawed back through any possible government financial help, but we do not intend to sue." Now you may ask what happened to compliance and cozy chat employed in other countries.

THE MMU & MR BRANSON LETTER: The 10 page memorandum of understanding between the Federal Government and Virgin Atlantic limited was signed on the 28th of sept 2004 which has the same date with the letter Mr. Branson addressed to the Honorable Minister of Aviation. The MMU designated VNA as flag carrier on London,New-York,Jeddah,Dubai and Johannesburg route with a seven year exclusivity and right of first refusal to operate all other routes covered by government bilateral/multilateral or subsequent air agreement (what happens to the open skies & dual designation agreement in place?). Also VNA is to benefit from tax and fiscal reliefs in respect of its operation (subtly subsidy)

In the MMU, clause 5b (iii) & (vi) states that VNA adheres strictly to laws and regulations prescribing a specific code of conduct that may be issued from time to time for and on behalf of the FG regulating the activities of airlines in the federal republic of Nigeria, while Clause 10 says Virgin shall procure that its shareholders shall offer to the FGN on behalf of Nigerian citizens ten percent (10%) of the equity share capital. (Will virgin still offer Nigerian the equity?)


Mr. Branson’s Letter was on a Virgin Atlantic letter head, written to the Honorable Minister of Aviation then Mallam Isa Yuguda. Part of the letter thereof states: that FG should grant special waiver for wet leased aircraft to be used for 18 months (NCAA law says 6 months)

Discount or waived airport- related charges in respect of new routes developed by the airline(subsidy).The fifth point which raised the recent controversy request that airport authority cooperates with VNA to allow for safest and best service. To this end the airline is allowed to use relevant international terminals in Lagos and Abuja.

The request was signed on behalf of the government by the minister and a Director in the Ministry of Aviation on a Virgin Atlantic letter heading and not in the MMU. The question now is the letter more binding than the MMU? That is for the court of appeal to interpret.

The federal government followed the due process, as there was and still no injunction restraining the government while we await the appeal court decision. I will strongly advise that FAAN in the future should consider the use of penalties or fines in future rather than the use “heavies” in enforcing decisions, that is the trend in civil aviation, more importantly it raises revenue.

Despite the stories VNA has good prospect and have contributed to the growth of air traffic and communication in the domestic air transport market. I urge them to continue touching the right spots safely and profitably. Also Nigerians should buy the shares whenever they are offered, in emphasizing this here is a quote from - Philip Tozer-Pennington, Managing Director - Aviation Industry Press “but consider for a moment what VNA could achieve if it were to become a true low-cost carrier covering West Africa, then linking the same with the rest of politically stable Africa through a hub at Nnamdi Azikiwe airfield in Abuja; this would capture much of the African transfer traffic. VNA can be the Southwest Airlines of Africa with a little vision and a great deal of financing -- the passenger traffic for a low-cost airline covering Africa is out there now and ready to fly!”

VNA should please take this advice seriously and get into low-cost (LCC) boat. a pique into their siblings show a clear distinction: Virgin Atlantic (long haul) Virgin Blue(LCC),Virgin America(LCC),V Australia (long haul),Pacific Blue (LCC),Polysien Blue (LCC)Air Asia X (long haul) and our Virgin Nigeria(long haul/LCC ?) . Presently, some of the above mentioned LCC are interlining with the mega carriers which are a big plus to their finances.

Finally in moving to local airport VNA have the option of MMA2 or the old terminal two managed by FAAN, with Arik presently operating from Zulu hall while Alpha hall is un-utilized, that is the hall close to 1st inland bank at local terminal which is in dire need of refurbishment and can be branded if VNA so wishes.