Furore Over MMA2

 

 

By Simon Ateba

Tempers continue to run high between Bi-Courtney Aviation Services Limited, BASL, on one hand and the Ministry of Aviation and the Federal Aviation Authority of Nigeria, FAAN, on the other over the Murtala Muhammed Airport 2. The two parties have been locked in a tango on the continued use of the General Aviation Terminal, GAT, at the old domestic airport and the passenger service charge. Moreover, there have been grumbles in some quarters on the 36-year time-frame government accorded Bi-Courtney to operate the MMA2, which it finished constructing two years ago on a build, operate and transfer agreement.

 

Commissioned by former president, Olusegun Obasanjo on 7 April 2007, the classy MMA2 came into use shortly after with Aero Contractors being the first airline to commence operations there with a turbo Dash-8 aircraft for flights to Warri and Port Harcourt. Conspicuously one of the best airports in Africa, the MMA has a capacity for five million passengers. The multi-level structure has separate arrival and departure halls, lounges, entertainment areas, food courts and shopping centres. The main terminal building has 31 check-in counters and there is an extension of a three-level car-park. The project cost N65 billion, with BASL securing N20 billion in loans from six Nigerian banks and the remaining N45 billion from businesses and friends.

Dr. Bolanle Olawale Babalakin, the BASL Chairman, signed the Memorandum of Understanding, MOU, on the MMA2 with the Federal Airports Authority of Nigeria, FAAN, in September 2007 as the concessionaire of the new airport. The idea to erect a world-class airport in Lagos was conceived after fire razed the domestic wing of the Murtala Muhammed airport on 11 May 2000 and paucity of funds constrained government from replacing it with a modern structure. The original agreement between government and Bi- Courtney to build the MMA2 was signed on 23 January 2003 after the former terminated an initial contract with Royal Sanderton Ventures Limited on account of non-performance.

 
At the 2008 Nigeria Aviation Conference, Babalakin explained why he decided to undertake the airport project: “My exuberance is driven by two factors. First, it has always been my firm belief that only Africans can solve African problems. Equally significantly, I have known that what we need to become globally competitive is first grade social infrastructure that our government’s purse has become too lean to finance. So we became interested in leveraging the many opportunities presented by PPPs (public-private partnerships) in reversing the acute shortage of public utilities in our dear country.” Public-private partnerships are contractual arrangements where the resources, risks and rewards of both a government agency and the organised private sector are combined to provide better efficiency, access to capital and enhanced compliance with an assortment of regulation. The public’s interests are assured through the requirements in the contracts that provide for on-going monitoring and oversight of the operation of a service or development of a facility. “In this way,” Babalakin explained, “it becomes a win-win situation between the government, its citizens and the organised private sector.”The terms of the MoU, indeed, offered Babalakin ample assurance of the project. Section 2, sub-section 2 (b), defines the exclusivity of the concession rights thus: “The Grantor guarantees and assures that it will not build any new domestic terminal in Lagos State and that no existing domestic terminal will be materially improved through the concession period that would compete with the concessionaire for the same passenger tariff. The concessionaire shall have a right of first refusal in the event that passenger traffic during the concession period necessitates an expansion of the terminal and the first right of consideration if the grantor elects to build a new terminal in Lagos State.” Sub-section 2 (C ) further states “The Grantor further guarantees and assures that all scheduled domestic flights in and out of FAAN’s airport in Lagos State shall during the concession period operate from the terminal.” FAAN further “assures and guarantees that it shall not during the concession period cause or authorise the erection or development of a shopping mall or any facility within 200 metres from the perimeter of the site capable of impeding and or threatening the concessionaire’s revenue generation.”

But FAAN, the Bi-Courtney management is complaining, does not seem to be abiding by these terms. Of particular instance, is the use of the GAT by some airlines as a parallel airport. While some airlines who have moved offices and operations to the MMA2 still retain counters at the GAT, Arik, the biggest operator with about 30 flights daily, has refused to move to the MMA2. The airline, pleading that the apron of the new terminal is too small to handle its big planes and the magnitude of its operations, still operates all its domestic flights from the old airport. Bi-Courtney has been counting its daily losses from Arik’s obduracy and the general default by the Aviation Ministry and FAAN in wholesale enforcement of the MoU. As the concessionaire strives to repay the huge debts incurred in building the new airport, its revenue profile from the MMA2 is greatly hampered by the alternative window that the GAT allows for airlines to exploit.

Gbenga Odugbesan, Head of Corporate Communication at MMA2 fumed that the “illegal presence of GAT” threatens the survival of MMA2 and success of the PPP. “The presence of GAT is causing a huge loss of revenue to Bi-Courtney Aviation services Limited. It is a huge distortion to our operations and projections. It is a major challenge to our survival as a company. It is a major test case for PPP in Nigeria and it is an issue that shouldn’t have arisen in the first instance given that the concession agreement’s provisions are lucid and unambiguous. It is an issue that should concern any patriotic citizen because PPP as an interventionist option for infrastructure development aims at transforming the nation with little or no financial burden on the government or tax payers,” he declared.

Odugbesan disclosed that there have been consultations at various levels with relevant government agencies about the sanctity of the concession agreement. “We have also created acceptable platforms and fora to drive home our point. Even though nothing seems to have happened, we are confident that something is in the offing. And given the recent court order in March at the Federal High Court and the commitment of the President Musa Yar’Adua’s government to PPP and the rule of law, hope seems to be closer than it has ever been,” he stated. Every month, managers of the airport spend about N200 million, sans salaries and insurance, to run it. “We are far from making any profit now. What is happening is that we dip into non-MMA2 sources of income to meet our financial obligations to our creditors because the combination of aeronautical and non-aeronautical revenues from the terminal is far from what is required to meet the obligations. We are running at a loss for now,” he explained.

So it is a long way, 36 years actually, for Bi-Courtney to recoup its investment. Some stakeholders are, however, kicking against the period as too long and too much of an advantage in favour of the concessionaires. It has already been reported that government is considering a strong re-look at the MoU, with the period and the controversial GAT issue as two key areas likely to be reviewed. Captain Dele Ore, president of Aviation Round Table, a group of activists in the aviation industry, has no grudge about the length of the agreement. “The MMA2 is an architectural masterpiece and a legacy that we can leave to our great-grandchildren. So the 36 years agreement is nothing in the life of a nation,” Ore said. He, however, expressed some reservations against what he called some “unfair portions” in the agreement. “Those who represented the government did not do a good job. There are some sections that are unfair,” he posited.

Also under contention is Bi-Courtney’s intention to increase its passenger service charge, psc. From the current N350 to $15 (about N2,500) from next month. But the Minister of Aviation, Mr. Babatunde Omotoba, is having none of it. Omotoba told journalists in Lagos that the ministry has not given Bi-Courtney the official go-ahead to charge the $15 as psc. But certain documents will not support his assertion. A letter dated 22 December 2006 and signed by Garba Mamman on behalf of the Ministry of Aviation directed FAAN to allow Bi-Courtney charge $15 for passenger service. On 2 February 2007, a letter acting on the minister’s directive went from Mrs. Ngozi Iloabachie, FAAN’s Commercial and Business Development Director to Bi-Courtney waving the concessionaire on to collect the new charge. Although approval has been given more than two years ago, Bi -Courtney has been charging the same N350 that FAAN charges at the GAT.

The passenger service charge is used to maintain facilities at the airports. But as Odugbesan argued, the sophistication of the MMA2 can in no way be compared with what obtains at other airports. He argued it is unrealisitic to maintain the current charge and still provide quality service. “There is no way we can maintain the charge,” he declared. The spokesman disclosed that the terminal building spends about N10 million on diesel every month to power the terminal and yet pays the Power Holding Company of Nigeria for electricity that is not supplied. Airlines are bracing up for a face-off with the concessionaire over the proposed hike in the passenger service charge as they told TheNEWS they are not prepared to increase air fare to satisfy Bi-Courtney. Odugbesan believed that unqualified implementation and enforcement of the concession agreement, the addendum, the MoU, and any other agreement, convention, court judgment incidental to the concession, as well as maximum support from and commitment to obligation by airlines and other facility users would smoothen its operations at the MMA2 and douse tension. He also advised government to finetune the appropriate regulatory and statutory framework for the survival of public-private partnerships in Nigeria.

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