Okowa’s Jinx Breaker with Asaba Airport
Asaba Airport stepped out of the shadows of neglect and scorn Tuesday, 23 February, to emerge as the second airport in Nigeria to operate as a concession with the promise of brighter days. First Investment Development Company (FIDC)-MENZIES Aviation (MA) Consortium won the brownfield contract to manage the airport for 30 years on terms that will invest over N28billion to build new facilities and upgrade existing ones. It has a bonus; the new classification of the upgraded airport as international.
Delta State Governor Dr Ifeanyi Okowa earns plaudits for pulling through the successful concession deal that the Federal Government has repeatedly failed to secure with the many loss makers that are Nigeria’s airports. Remarkably, Okowa led Delta State to this deal that positions Asaba Airport to replicate the success story of the Murtala Muhammed Airport2 Lagos run by Bi-Courtney Limited. It holds promise.
Asaba is the first brownfield concession as MMA2 is the first greenfield. A brownfield concession involves granting rights to an investor to manage existing assets and facilities as well as to improve them. With a greenfield, the investor builds from the ground up.
By 17 March 2021, Delta State will receive an upfront payment of N1b from the Asaba International Airport Development Consortium to confirm their financial obligations. The concessionaire would commence the execution of several “mandatory capital projects” within the next three years. They include upgrading the Airport/Terminal and building facilities for cargo, maintenance, repair, operations, and tank farm. They will also build an industrial park, offices and a hotel/conference facility.
Their obligation includes ensuring that Delta State indigenes constitute a minimum of 20 per cent of employment, getting an airline to operate out of the Asaba International Airport as its operational hub, and ensuring the continued viability of the airport as their fortunes also depend on it.
The concessionaire will pay Delta State a royalty of 2.5 percent of its annual earnings before interest, taxes, depreciation, and amortisation (EBITDA) in addition to an annual fee of N100m each year.
The revival of Asaba Airport and promotion to an international status is a positive story of intentionality and government continuity. It runs against the grain of our many airports as White Elephant projects. In the essay, “Our airport is newer and bigger than yours though a white elephant”, https://www.thisdaylive.com/index.php/2020/08/16/our-airport-is-newer-and-bigger-than-yours-though-a-white-elephant/ I canvassed the case for stopping the many airport projects in the South East as only the egos and need of the governors are the drivers. Records from the Federal Airports Authority of Nigeria show that only three of Nigeria’s over 20 airports covered their costs between 2017 and 2019.
Former Governor Dr Emmanuel Uduaghan built the Asaba Airport that took off in 2011. Between the first commercial flight to Asaba on 24 March 2011 and October 2013, the airport recorded 6 300 flights conveying over 190 000 passengers. The volume translated to an average of 260 flights and 6 800 passengers per month. It had potential.
However, the airport quickly flew into trouble for low quality and non-compliance despite the N40b cost. Experts raised severe concerns about the undulating nature of the runway/taxiway and the hill beside the airport.
The Nigerian Civil Aviation Authority downgraded it to a Category 3, meaning it could only accommodate small aircraft such as the Q400 and DASH 8.
What has Okowa done? It is to the credit of the former Senator and current governor that he took up the challenge of not abandoning the project. Instead, he recognised that the original impetus and projections made sense only if. He brought the IF.
As the governor recounted during the ceremony to sign the concession agreement, “This administration had to rehabilitate/reconstruct the runway fully, taxiway and other ancillary works, complete the perimeter fence, and evacuate the hill beside the airport for the provision of an obstacle-free zone for the runway as demanded by the regulatory authority. Subsequently, the regulator upgraded the Asaba Airport to Category 6, which enables aircraft as large as the Boeing 737 to land.”
The Okowa administration installed the Instrument Landing and Airfield Ground Lighting System that enabled the airport to now handle night operations. It has operated night flights approved by the NCAA and the Nigeria Airspace Management Agency since the beginning of 2021. “I am happy to report that the airport now has a medical centre. The Firefighting Station has been completed, while the Watchtower for firefighters is 80% ready. Meanwhile, the previously unserviceable Automatic Weather Observation System and the Low-Level Wind Shear Alert System have been repaired and are functioning, improving the overall safety of the airport”, Okowa reported.
Partners in the First Investment Development Company (FIDC)-MENZIES Aviation (MA) Consortium include First Investment Development Company Limited, Menzies Aviation Plc, Air Peace Limited and Cybernetics International Services Limited. Others are Rainoil Limited, Radisson Blu Hotels, Quorum Aviation Limited, Arbico Plc and Sibraxis EEIG of Greece.
Concessions are the route to profitability and sustainability for most airports globally. Nigerian lawyer and investment guru Adebayo Ogunlesi is the majority shareholder and runs the Gatwick Airport in London as a concessionaire. New York’s JFK Airport runs a substantial part of its operations on the concession model. It applies equally to the celebrated Changi Airport in Singapore.
The Public-Private sector participation model has worked in many jurisdictions. There are many lessons from similar concessions, starting with that of the Bi-Courtney team with MMA2 in Lagos. The Delta State Government and its concessionaire must avoid the minefields.
Deloitte says in Balanced Concessions For The Airport Industry: Delivering Win-Win Outcomes For Successful Airport Concession Contracts, one of the main lessons in airport concessions is ensuring that the partners take in the interests of stakeholders beyond the state government and the investors. Stakeholders include critics such as the opposition APC that picked on the N100m fee. It forgot the N1bn, the share of profit before EBITDA as royalty and the projected investment of N28bn. The most significant is the probability that the airport will function optimally in private hands, guaranteeing jobs and spin offs. The partners must listen to them as well.
The Deloitte study suggests four guiding principles for a balanced concession: collaboration, balanced risks and rewards, transparency and information sharing, and mutual interest. May Asaba International Airport succeed.