Zemedeneh Negatu, global chairman of Fairfax Africa Fund
LLC, which is helping the investors raise funds also says it is considering
whether to accept another $50 million from “two large institutional
investors.”.
The airline is being established by Ethiopian Airlines Group
in partnership with institutional investors and the Nigerian government and
promoters say it plans to start operations in the as early as October this
year.
Nigeria Air will start flying 15 domestic routes and then
expand to West African cities as well as international routes including London,
New York, and Shanghai.
Nigeria Air, will start with a combination of two
wide-bodied planes and six narrow-bodied aircraft, Mesfin Tasew, chief
executive officer of Ethiopian Airlines said in an interview with Bloomberg TV.
The proposed carrier will give Ethiopian Airlines, the
continent’s biggest, a foothold in Africa’s most populous country, where about
23 domestic airlines compete for influence. Previous government attempts to
start a flag carrier have failed.
The Nigerian government will own 5% in Nigeria Air.
Ethiopian Airlines will control 49% stake of the new company, while the
remaining will be held by Nigerian institutional investors including MRS Oil
Nigeria Plc, two companies in the aviation sector, “a big financial
institution” among others, said Zemedeneh Negatu, global chairman of Fairfax
but he declined to name the investors. Nigeria’s government won’t pay cash for
its stake, he said.
Carriers in Nigeria have persistently struggled to stay
viable. They have been plagued by lack of access to foreign exchange, high cost
of aviation fuel and multiple taxation regimes. Only Air Peace, the nation’s
biggest carrier, currently flies overseas.
Erstwhile flag carrier Nigeria Airways stopped operations in
2003 and was liquidated. A partnership with Virgin Atlantic Airways Ltd.to
start an airline a year later collapsed after the UK-based company withdrew
from the partnership over disagreements with the Nigerian government.
Operating an airline in Nigeria is “not a simple task. It
will be a big challenge,” Tasew said, adding that it has $82 million of funds
it needs to repatriate from the country. “We have people who know the business
culture of Nigeria. We believe we can manage and develop the airline.”
Ethiopian Airlines won a bid to start Nigeria Air’s
operations in September 2022, but has faced resistance including a legal
challenge from local rivals, which claim that it has been handed an undue
advantage by the government, which could cripple their businesses.
Ethiopian, with the largest aircraft fleet in Africa, will
leverage its 60 years of operational experience to help Nigeria Air lease
planes at cheaper rates, Fairfax’s Negatu said. The airline will also provide
$400 million in guarantees to lessors for the acquisition of aircraft for
Nigeria Air, he said.
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