Concession’ll make African airports profitable –Aviation expert –

Concession’ll make African airports profitable –Aviation expert – The Sun Nigeria

By Chinelo Obogo, [email protected] 

AS President Muhammadu Buhari’s administration decision to concession four of the nation’s international airports continues to  debate with some experts in favour of Public Private Partnerships (PPP) to drive the project, critics of the initiative say the Outline Business Case which gives 60 percent of revenue to the concessionaire and 40 percent to the Federal Airport Authority of Nigeria (FAAN) makes the case unsaleable.

Out of the 40 per cent, the Authority would still be required to remit 25 percent to the Federation Account.

Critics of the policy have however described the OBC as defective since the concessionaire would not be required to make any substantial improvement to the airports despite collecting much of the revenue.

But the Minister for Aviation, Hadi Sirika, has said at different fora, that concession would bring the much needed development to the sector even as he allayed fears of massive job loss.

According to the Director Aviation Africa at Netherlands Airport Consultants (NACO), Marcel Langeslag, private sector management of the facility would create more profitability that being managed by pulic sector bureaucrats in government. The aviation expert who was a guest on Jon Howell’s ‘AviaDev Insight Africa’ podcast, spoke on emerging trends that would drive the African aviation sector. Among these trends is airport concession, as he strongly believes that there is a growing need for private sector participation and funding in African airports.

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He said airports in Africa and around the world also suffered massively as a result of COVID-19 pandemic and shared some of the options available to African airports to recover as quickly as possible to reduce their exposure to other catastrophic events.

Private sector investment in African airports

Governments can’t do everything and it became even more obvious during the pandemic where resources are even more constrained.  There is a growing need for private sector participation and funding. If you do need to develop cargo infrastructure at your airport, you don’t need to do that yourself. I definitely think that private participation in airport development is a long term trend that is only being boosted by the pandemic. We are already seeing a lot of private activity on the continent. Once the expertise around PPPs improves, more and more will happen. The challenge is that it is not easy to pull off because it could be a politically challenging process. But I do think it is something that we would see picking up speed in the near future.

We know that private sector players are more astute than government entities are. Privately owned airports are often better at generating revenue and being profitable than government owned airports. What should be considered as a barrier to PPP is the traffic risk and I do thing that the pandemic will be taken into account during negotiations which may lead to lower evaluations. I feel that private investors will become more conservative when they know what the impact of a pandemic would be. It is difficult to predict a future pandemic and I think it would lead to private investors asking the government to take up more of the risks.

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Diversification of non-aeronautical revenue

About 70 percent of African airports revenues are aeronautical and the global average is about 55 percent which is the wrong side of the line. How do we make the non-passenger related ecosystem more resilient? There are huge oppourtunities in real estate. African airports have a lower share of income from real estate development even though a lot of airports own land that they haven’t used yet. They are in prime location and the land is extremely valuable and it is a huge oppourtninuty for airports to develop and diversify to non-passenger related revenue. You can find sectors of industries that are linked to your airport business like warehousing, storage, packaging etc.

Open skies in Africa

Another emerging trend is the open skies. (In November 1999, a group of African aviation stakeholders met in Côte d’Ivoire to thrash out an agreement on integrating commercial aviation across Africa. The outcome was the Yamoussoukro Decision, a document supporting the liberalisation of commercial aviation in Africa). The Yamoussoukro Decision brought about the Single African Air Transport Market (SAATM) and progress is being made in that aspect maybe not as much as we would have thought because we need the political will to get on with it. The benefits of SAATM are huge but we are hoping for the implementation to accelerate.

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Open borders

Another trend which is a flagship of the African Union is open borders. The Union has said they would like to have an African passport sometime in the future which they would strive for but that would not be implemented anytime soon, but in the meantime, opening borders are making it easier for Africans to travel to other countries. The AU and the African Development Bank published a visa index every year to show the countries that are leading the way and the ones that are following.

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