AIRPORT PRIVATISATION: LET US TREAD SOFTLY

The recent announcement by the Bureau of Public Enterprises and subtle confirmation by the Honourable Minister of Aviation on the privatisation of some airports in the country is hasty and may be counterproductive. We are all aware that the remodeling process and associated loans has gulped a lot of money that has consequently sent FAAN to the abyss of debt. The debt should be warehoused by the ministry for now while they also initiate a process of verifying the quality and cost of the remodeling contracts with the hindsight that the contracts and approvals were shrouded in secrecy. The Chinese loans for the new international terminals can be excluded from this process. The question boggling our mind is why the rush to privatise some airports just a few months after turning down the same advice in the Orosanye report? Is the government looking for quick cash to reduce the over N150b debt generated from the remodeling process? Can the privatisation of two viable airports out of about twenty be the solution to indebtedness and inefficiency? FAAN needs help as an organisation, her problems goes beyond budgetary allocation from the federal government because the organisation itself lacks transparency; it has not been able to convince reputable investors. The non availability of a verifiable financial statement over the years, frequent changes in management and leadership in the supervising ministry are other contributory factors. Although the ministers are from the same political party they have divergent policy trust for the organisation, 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 minimum of 10 years. Expertise is required in airport management and in generating 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 world over are seeking to increase non- aviation income. The UK experience of privatising 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, who 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 who can be sourced and verified by a click on the mouse. They will act as advisors or management consultants to government within a limited time frame. I am not referring to the usual masquerades that form a ‘quickie’ consortium and rush to Corporate Affairs Commission for registration and will bid and win using Padi- Padi in government. During this period the bid winner should be given a free hand to manage, restructure and position the organisation for a Public Private Partnership or partial privatisation. The management company will ensure compensations and adjustments are provided for all collaterals. Organizations such as Intervistas, GMR, Macquarie, Ferrovial e.t.c. Another 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 endeavour to find a lasting solution to the turbulent PPP arrangement in the industry. It is also a sad realisation that all concessions 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 realisation that principal personnel in FAAN and the Ministry at the period, when this concession and others were signed, were either compromised or exhibited little knowledge of the legal booby traps in the agreement. The midwiferies of this process 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 our Ministry need to get their acts together and bite when necessary using requisite acts and ensuring transparency from the scratch. This is a difficult call considering the concurrent misstep of the PPP processes in the industry which has made the process disappointingly slow. Companies that have been badly bruised by our PPP include Aeroport Gateway, HIC, Maevis, Bi-Courtney etc. 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 privatisation and cannot manage it, we mismanaged the private jet issue by making it more political than safety which is the bedrock of the industry, it will be replicated in the terminal and parking usage if we privatised. The BPE wants to start with Abuja; an airport that was concessioned to Aeroport Gateway and annulled a couple of months later, only to surreptitiously handover the GAT terminal of the same airport to a private organisation sometime last year without due process. Malaysia Airport Company recently purchased Istanbul airport in Turkey just like the Spanish company did some time ago with some British airports. Our abysmal PPP appraisal will result in severe diplomatic backlash if we short change a foreign organisation. If we insist on privatisation 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 the cherry picking option. The Argentines took the 30 airports in totality using funds from the viable to support the unviable ones; the Indians divided the airports into green field and brown field before privatising. 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 factor in these agreements are capital injection, improvement of airport facilities, financial returns to 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 were specified. Luckily some states in Nigeria have been building new airports without waiting for the federal government. States like Jigawa, Imo, Akwa-Ibom, Osun took the bull by the horn. It is laughable and unfair for the federal government to say they are planning to build airports in Bayelsa, Kogi, Nassarawa, Ogun and Kebbi states when these states can emulates their counterparts by building and sourcing investors as partners in developing an efficient airport. If the federal government has funds to waste on those states they can as well use it to improve and expand neighboring airports owned by them. Port Harcourt, Ibadan, Makurdi, Sokoto and Akure airports respectively can benefit from this fund considering their derelict state. We will get it right if we juxtapose these options while ruminating over our socio-economic environment, whichever option we choose 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 come 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 a minimum of one year. The problem in FAAN is not privatisation but bloated contract debt, political interference and appointees that have made the organisation top heavy. It has increased its running cost, duplicated positions while they subtly run errands for their pay masters through allocation of contracts. We are waiting for the Minister to act its four months now of excessive grammar, garlands gathering and inherited exuberance. He 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. In concluding concessions and privatisation is the way forward, they must be accompanied by transparent, robust and independent economic regulation supported by effective industry consultations.