Needless proliferation of unviable airports, by Kelvin Osa Okunbor
The Arbiter Guest Columnist
Needless proliferation of unviable airports, by Kelvin Osa Okunbor
There seems to be needless competition in establishing aerodromes without due regard to the feasibility of the venture. In the circumstances, authorities are “forced” to spend revenues earned from four viable terminals in Lagos, Abuja, Port Harcourt and Kano to subsidise operations in the 20 other airports managed by the Federal Airports Authority of Nigeria (FAAN). Because of necessity, we are giving space to Kelvin Osa Okunbor who examines the rationale behind establishing unviable airports by state governments and wealthy individuals.
Could it be as a result of genuine interest in the economic well-being of citizens that informs the rush to establish aerodromes by state governors and wealthy individuals? What is the rationale for building airports that are not economically viable and which will drain the pint-sized revenue accruable to the state?
Though the establishment of airports as critical air transport infrastructure falls within the purview of the Federal Government, making such venture viable, intrinsically, rests on the shoulders of managers in the domains they are sited. This, every so often, continues to be taxing.
Managers of these airport terminals in Lagos, Abuja, Port Harcourt, Enugu, Kano, Kaduna, Benin, Owerri, Jos, Sokoto, Maiduguri, Yola, Bauchi, Gombe, Akure, Ibadan, Ilorin, Calabar, Minna, Katsina, Makurdi and other locations, continue to evolve a lifeline to keep the facility from collapse.
More states caught by the bug
Like a virus, the bug has caught up with Delta, Akwa Ibom, Jigawa, Kebbi, Osun, Ogun, Lagos, Ekiti, Ebonyi, Anambra, Yobe, Zamfara, Nasarawa, Taraba, Edo, and others craving to own airports.
The Minister of Aviation, Hadi Sirika had revealed recently that the Federal Government planned to build 10 new airports across the country in the next three years.
He listed Anambra, Benue, Ekiti, Nasarawa, Ebonyi, and Gombe as some of the states where the projects would be sited. He further revealed that Kebbi and Dutse airports had been taken over by the Federal Government for redevelopment.
Sirika said: “From 2015 till now, we have seen a lot of growth in civil aviation, the number of airports is increasing.
“So far, about seven airports have been added to the map, some of them completed and some are under construction.
Aside from Murtala Muhammed Airport (MMA), Ikeja, Lagos; Nnamdi Azikiwe International Airport (NAIA) Abuja; Mallam Aminu Kano International Airport (MAKIA), Kano and Port Harcourt International Airport (PHIA) Omagwa Rivers State, the other terminals spread across the country cannot generate enough revenues for optimal operations.
The International Air Transport Association (IATA) lately stated that for an airport to be viable and self-sustaining, it must have at least five million passengers a year.
Judging from passenger traffic, airports in Benin, Calabar, Owerri, Enugu, Jos, Gombe, Dutse, Birnin-Kebbi, Uyo, Asaba, Enugu, Maiduguri, Yola, Makurdi, Ibadan, Akure, Ilorin, Katsina, Sokoto, Jalingo, and Kaduna, among others, could be described as unviable, in the circumstances.
Some aviation experts and analysts have raised the alarm over the viability of these projects. They argue that the proliferation of these facilities will not enhance economic development.
Viability statuses of some Nigerian airports
Data obtained from the global flight tracking website: Flight radar 24 confirms the viability status of some airports in Nigeria.
For flight recordings covering August 19, 2021, and August 25, 2021, Lagos Airport recorded 203 flights, Abuja 200 flights, Kano 32 while Port Harcourt had 80 flights in their listing as viable airports.
In the same period, sampled flights recorded in the unviable airports stood at 24 flights for Benin Airport, 45 for Enugu Airport, 58 for Uyo Airport, 20 flights for Calabar Airport, 14 for Kaduna Airport, four flights for Jos Airport, whereas Ilorin Airport had 21.
Flights recorded for Ibadan Airport was 14, Yola Airport recorded 23 while Maiduguri Airport recorded 16 in the unviable airport category.
In a chat with reporters, the former Managing Director, Federal Airports Authority of Nigeria (FAAN), Mr Richard Aisebeogun said many airports in Nigeria are unviable because of poor operational facilities.
Aisebeogun said for an airport to be viable and self-sustaining, it must have at least five million passengers a year.
He said the five-million-passenger-mark is the parameter set by the International Civil Aviation Organisation (ICAO), the global aviation regulator.
On the other hand, other experts differed in their opinions on how to make Nigerian airports viable.
According to Dr Daniel Young, Managing Director, Daniel Young Global Investment Limited, there is a need for managers of airports to be creative in designing their operational model to capture more revenues.
Young said managers of airport terminals should look beyond the traditional sources of revenue, which is flight-related and explore what is described as non-aeronautical sources in aviation parlance.
He said there was nothing wrong with state governments and other entities building more airports, but those saddled with managing such facilities should be creative to work out different ways of generating income.
He said if given the opportunity, he would create models that would enable FAAN to earn over one billion dollars from its airports annually.
Young said FAAN should also look inwards on ways to generate revenue as it has been observed that it had been operating below resource capacity.
On his part, an aviation security consultant, Group Captain John Ojikutu (rtd) said there is a need to review the business plans of many terminals to make them viable.
He said airports classified as category one would attract more charges thereby increasing their revenue chances for the upgrade of facilities and training of technical personnel.
Is concession best option?
Chief Executive Officer Belujane Konzults, Chris Aligbe, expressed support for the Federal Government’s move to concession Nigerian airports which would help in properly positioning them for profitability.
He said it was expedient for the Federal Government to keep supporting FAAN and other regulatory and service providers with grants to make them viable.
Aligbe said aviation infrastructure detests temporary shutdown. More so, they are ready-made tools in the hands of politicians. He observed that some of the unviable government-owned airports were built by state governments for political aggrandizement.
The Secretary-General of the Aviation Safety Roundtable Initiative (ASRTI), Group Captain John Ojikutu (rtd), urged the government to concession all the airports, and not the big four alone, to run efficiently and profitably.
Ojikutu advised that the Lagos and Abuja airports should be thrown open for concession in blocks with four or six others.
The Chairman, House of Representatives Committee on Aviation, Nnolim Nnaji called for the unbundling of FAAN ahead of the move to concession major airports. Nnaji said Nigeria’s airports were not just underdeveloped, but grossly underutilised.
Investigations reveal that FAAN headquarters in the past three years generated N16.10 billion in revenue and collected N15.02 billion. Its expenditure was put at N59.41 billion, leaving a deficit of N29.1 billion.
The Chairman, NIGAV Centre, Fortune Idu, said FAAN was overburdened with managing over 20 airports and paying salaries of over 12,000 workers from the revenue generated by Lagos and Abuja airports.
Experts say the airports would become viable if the managers evolve ways to improve operational facilities such as the installation of airfield lighting systems to pave the way for night flights and increase aircraft utilisation.
Despite their non-viability, Managing Director, FAAN, Captain Rabiu Yadudu said airports will not be shut down because they are critical air transport infrastructure.
He said: “Airports may appear running at a loss, but its managers need to comply with special protocols to meet the required standards. The managers must carry out upgrades and maintenance to ensure that the airport is serviceable at all times. There must be urgent compliance with international best practices.
“The Federal Airports Authority of Nigeria is subsidising 18 airports that are not viable.”
Revenue accruals and expenditures of most airports
A fact-sheet of revenue and expenditure of most airports showed huge revenue shortfall and deficits across the board in 2017, 2018 and 2019.
For instance, the Kaduna International Airport that was upgraded during the 2017 closure of Abuja Airport has, in the past three years, pooled a total of N1.027 billion in generated revenue. Of the sum, N716.7 million was collected. However, the expenditure was in excess of N4.41 billion, leaving a deficit of N3.69 billion.
The Mallam Aminu Kano International Airport, Kano, did not fare better. The airport in 2017, 2018 and 2019 pooled a total of N8.28 billion in generated revenue and collected N7.16 billion but its expenditure totalled N9.6 billion, leaving a shortfall of N2.44 billion.
The Katsina Airport managed to make a total of N250.8 million in generated revenue in three years, out of which only N42.1 million was collected. Its cost of operations was put at N1.58 billion, leaving a deficit balance of N1.54 billion.
In the same manner, Sokoto Airport had a total of N725.7 million generated revenue, out of which N400.1 million was collected. The cost of operation was in excess of N2.71 billion, which resulted in a deficit of N2.31 billion.
In the South, Ibadan Airport in three years made a total of N349.2 million in generated revenue and collected N244.9 million. The expenditure amounted to N1.39 billion with a deficit of N1.14 billion. Ilorin International Airport generated N437.1 million in revenue in three years and collected N264.2 million. The expenditure was in excess of N2.453 billion, giving a shortfall of N2.19 billion.
It is the same for Akure Airport. The facility pooled a total of N175.8 million in generated revenue and collected N168.7 million. But the expenditure was N1.06 billion, leaving a difference of N893.7 million.
The Benin Airport in Edo State also ran at a loss. The airport generated a total of N993.2 million in three years and collected N930.1 million. The total cost of operations was N2.02 billion, leaving a shortfall of N1.09 billion.
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The Margaret Ekpo International Airport, Calabar had a total of N540.8 million as generated revenue, though collected more at N559.6 million, the expenditure was as much as N2.50 billion, giving a deficit of N1.94 billion.
Similarly, Sam Mbakwe International Cargo Airport, Owerri, amassed a total of N1.25 billion in generated revenue and collected N1.08 billion. Expenditure was, however, N2.50 billion, with a shortage of N1.42 billion.
Though airports are classified as critical infrastructure with the potential to boost economic activities, their location, experts say, requires deep thinking to drive their viability.
Should state governments build airports?
Chief Executive Officer, Centurion Securities, Group Captain John Ojikutu (rtd) said he is not in support of state governments building airports.
He said: “It does not make economic sense for any of the states, other than Lagos, to build an airport.”
But, President, Aircraft Owners and Pilots’ Association of Nigeria and former Chief Executive Officer, Associated Airlines, Mr Alex Nwuba said there is nothing wrong in state governments building airports.
He said those opposed to the project should have a rethink.
On viability, he said: “Having an airport is basically to open up the state to citizens, foreigners, investors, speed up access to medical services and provide a way for agricultural products to leave the state at the appropriate time.”
Controversies over running state-owned airports
On April 17, 2019, the Federal Airports Authority of Nigeria (FAAN) threatened to withdraw essential services to the Gombe and Kebbi airports over debts estimated at about N731, 873,721 million.
Investigations reveal that out of the N731, 873,721 debts, the Gombe Airport is indebted to FAAN to the tune of N607, 289,972, while Kebbi is indebted to FAAN to the tune of N124, 547, 240. The debts are backdated to September 10, 2018, according to a circular to debtor airports from FAAN’s Credit Control Department.
The circular demanded that the airports should pay up before May 1, 2019, or face FAAN’s sanctions in the form of withdrawal of those services.
The Gombe and Kebbi airports are the two most heavily indebted airports to FAAN. It was, however, learnt that by May, the other private airports indebted to FAAN might also face similar sanctions.
Commenting on the development, an aviation analyst, Engr. Sheri Kyari stressed that it was not sustainable for a state government to operate an airport.
“It is not just about building an airport. You need to talk about maintenance,” he said.
On February 23, 2021, the Delta State entered into a 30-year concession agreement with FIDC-Menzies, the major concessionaire’s Special Purpose Vehicle (SPV) to manage the Asaba International Airport.
Part of the terms of the agreement is the incorporation of its name into Asaba Airport.
The mandate of the major concessionaire is to grow traffic, increase the economic prosperity of the state by taking advantage of the proximity of Asaba to Eastern commercial hubs of Onitsha and Nnewi in Anambra State.
Other sub-concessionaires of the aerodrome are Air Peace which is serving as the anchor airline and had indicated plans to build a Maintenance Repair Overhaul (MRO) facility; Multifreight Cargo and Logistics which will provide cargo and logistics services, Arbico Construction Company which intends to develop the business park, hotel and convention Centre.
Rainoil Limited and Cybernetics Limited are to develop the tank farm and provide aviation fuel while Quorum Aviation Limited is poised to develop and manage the private jet and helicopter terminal.
The concession stipulates that the concessionaire would pay the state government N100 million royalties every year for the 30 years concession pact.
Delta State Governor, Ifeanyi Okowa said he adopted the most suitable option open to the state government at this time.
He said the State Government identified private investors who will complete the development and invest further in the expansion and modernisation of facilities at the airport to meet global standards.
The Governor lamented that the airport which was conceived and built by former Governor of Delta State, Dr Emmanuel Eweta Uduaghan to tap from the proximity of the Eastern cities of Onitsha and Nnewi and to be a hub for cargo export for agricultural and manufactured products suffered a major setback when the airport was downgraded to category three by the Nigerian Civil Aviation Authority (NCAA).