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All the sides to Ethiopian Airlines’ move to create a Nigerian local airline

Ethipian airlines hopes to enter Nigerian market

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All the sides to Ethiopian Airlines’ move to create a Nigerian local airline

Africa’s aviation giant, Ethiopian Airline (ET) is looking to establish a Nigerian airline and stakeholders are all weighing in. The airline’s Group Chief Executive Officer, Tewolde Gebremariam, announced that it was already working with Nigerian government authorities to establish its local operation.

Backstory: Gebremariam sees major opportunity in Nigeria’s domestic aviation market. The ET chief said it would partner with local investors to establish the airline.

  • “The failure of Nigeria to own a major carrier was a big threat to the airline industry in Africa because that had given an opportunity for international airlines to make a foray into the continent.”

However, the majority of local stakeholders do not seem to buy it, and have expressed strong opposition to the move in the media.

Arik Air – a major domestic airline urged the government to block the move in the interest of protecting its local businesses. The company’s chairman, Joseph Arumemi-Ikhide said that there was no way the Ethiopian government would have allowed a domestic rival to ET.

“Although many African countries are signatories to the Single African Air Transport Market (SAATM), only Nigeria and Ghana keep the rules of the treaty; other countries bend it in a way it would protect their own airlines,” he said.

By the numbers:

  • 15.2 million passengers passed through Nigerian airports in 2018. This represents a 19.11% increase from the 2017 figures, according to the Federal Airports Authority of Nigeria (FAAN).
  • According to the Airline Operators of Nigeria, Nigeria loses about $3 billion to foreign airlines annually. The lobby group argues that it has dire economic impacts including the weakening of the local currency, job losses and stifles the growth of the domestic players.

Why it matters: Local operators fear that ET might monopolize the market and want government to protect them. However, there are valid concerns about a vacuum in the local aviation industry to be filled and the potential benefits that competition and expertise will bring to the industry.

Feyi Fawehinmi, a policy analyst and commentator, told The ScoopNG in a message that: “Yet again we see that a lot of ‘stakeholders’ in Nigeria are not particularly concerned with consumer welfare. As much as they don’t like external competition, they don’t like internal competition either. In this case it is going to be a local airline with local investors employing locals, paying local taxes and providing a service to locals. Yet the ‘stakeholders’ are up against it because one of the owners is not local. We can only hope that the government does not listen to them”

What policymakers are thinking: The ScoopNG spoke to the Chief Executive of Nigeria’s Federal Competition and Consumer Protection Commission, Babatunde Irukera to hear what the government thinks about the issue. Irukera signaled that Nigeria is open to ET’s move and there are no real obstacles.

  • “To the extent that the proposed arrangement promotes economic expansion, shared prosperity, additional choices for consumers, while also creating value in Nigeria by opening employment opportunities, increasing competition, stimulating innovation and improved quality and safety standards, it is a welcome initiative.”
  • “It is possible for the arrangement to certainly do this, but it requires adequate and skilled regulatory scrutiny, negotiation and oversight to ensure it does not turn out to be an opportunistic advantage taking of existing and otherwise budding domestic operators.”

Irukera offered additional explanation:

“By law, the Civil Aviation Act, and by international convention, the domestic market is the preserve of domestic airlines. By Bilateral Air Service Agreements, nations exchange traffic rights and frequencies with carriers of each nation. Under the complex aviation regulatory framework, Ethiopian Airlines is unlikely to be able to operate domestically without creating a fully domestic operation or investing in an existing one.”

Bottomline: Nigerian consumers need more options, just as the aviation industry needs more players for growth to occur. The government is obliged to protect local operators (which it is already doing through various interventions). But this must not become a hindrance to the foreign backed players who have the experience and capacity to improve and expand opportunities in Nigeria’s aviation sector.

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