• Appraising Nigeria’s bilateral air service agreements

    Appraising nigerias bilateral air service agreements - nigeria newspapers online
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    Inferred from its nomenclature, Bilateral Air Service Agreements (BASAs) are contracts which govern the relationship between two countries relative to mutually-beneficial access to their respective commercial aviation markets/routes. On one hand, beyond the fundamentals of contract law, the germane principles of equity, reciprocity, direct flight operations, international trade and cooperation are pivotal to sustaining BASAs.

    On the other, rough international aviation politics, national interests, securing lasting competitive advantage, market share and sharp practices are very real. Navigating these choppy waters therefore demands an extremely careful balancing act of safeguarding sovereign interests, ensuring a reasonable degree of market access and open competition, adherence to relevant international agreements and domestic law whilst maintaining decent diplomatic relations with partner nations. A thorny conundrum? Certainly!

    BASAs cannot be considered in isolation because they subsist within an aviation framework which engages binational, national, international and transcontinental regulatory contexts. Afterall, every flight which departs from any location is, to a greater or lesser extent, subject to an international aviation order.

    Indeed, the 1944 Convention on International Civil Aviation or the “Chicago Convention”, berthed the International Civil Aviation Organisation (ICAO), in 1947. ICAO is a specialised agency of the United Nations Social and Economic Council (ECOSOC) responsible for global civil aviation and rules pertaining to airspace, aircraft registration, safety, security, environmental sustainability and economics.

    Seminal provisions of the Convention grant each state complete sovereignty of its airspace; restrains states from attacking civilian aircraft; requires uniformity between each state’s aviation regulations and the Convention etc. Importantly, Article 29, stipulates, prior to flight departures, that every pilot must ensure an aircraft’s airworthiness, completeness of relevant certifications, passengers’ names, cargo manifests, crew licences, journey logbooks, radio licences, are physically aboard the aircraft.

    Nigeria ratified the ICAO Convention on November 14, 1960, just a month after Independence on October 1, 1960. Unsurprisingly therefore, aviation falls within the exclusive legislative competence of the Federal Government, per Schedule II, Part 1, section 3 of the 1999 Nigerian Constitution (as amended).

    Pursuant to section 8 (3) of the Civil Aviation Act 2022, the Nigeria Civil Aviation Authority (NCAA) is the singular regulatory authority for civil aviation in the country with an extensive remit encompassing air safety; airports; airspace; economic regulation of the civil aviation industry; aviation licensing, meteorological services etc.

    BASAs govern the unique economic minutiae of aviation compacts between Nigeria and partner countries. To date, Nigeria has executed over 90 independent BASAs with various nations across the world.

    Even so, how many of those Bilateral Air Service Agreements are effective? How do the agreements benefit the average Nigerian international traveller and the local economy? Are the principles of equity, reciprocity, effective international trade and cooperation consistently honoured and are they mutually-beneficial to Nigeria and signatory states of these so-called bilateral-air-service-agreements?

    What, if any, is the viability of the Single African Air Transport Market (SAATM)? How are entry barriers to each bilateral air service agreement partner’s markets overcome? Assuming, without conceding, that there are indeed open markets with Nigeria’s BASA partners, does the country possess the capacity to honour all its contractual and regulatory obligations in those markets?

    Addressing these issues concurrently, for several years, until March 30, 2024, the direct round- trip London/Lagos and London/Abuja routes were completely dominated by foreign airlines, specifically British Airways and Virgin Atlantic; with relatively opaque gains to the Nigerian economy, and optimal gains to the UK economy.

    For example, in 2023, Virgin Atlantic posted total revenues of £2.4 billion from its flight operations, representing an increase of £323 million from 2022. Notwithstanding challenges in extricating the exact contribution of the airline’s revenue from Nigeria, one does not need to be a rocket scientist to reasonably infer the profitability of the London/Lagos route to Virgin Atlantic given sustained passenger demand for business, leisure and holiday travel and the airline’s pervasive dominance on that route. Reinforcing that inference, as of 2023, Nigeria was Africa’s largest economy boasting a GDP of $477 billion according to Business Insider Africa.

    Evidently, no law has been broken, and Virgin Atlantic is a business, and not a charitable organisation. Nevertheless, from the specific angle of Nigeria’s BASA with the UK, it offered very little value for the local economy. The same logic applies to International Airlines Group (IAG), the parent company of British Airways.

    Its 2023 full year profit before exceptional items, was £3.51 billion compared to £1.25 billion in 2022 and the fundamental principle of reciprocity in proper BASA compacts, relative to the UK and Nigeria, was demonstrably absent; because there was no Nigerian airline operating on that route! However, robust competition on the lucrative Lagos/London direct route altered the duopoly of British Airways and Virgin Atlantic on March 30, 2024 with the entry of Nigeria’s Air Peace.

    For starters, Air Peace commenced operations on that route offering tickets at N1.2 million, which, hitherto, foreign airlines offered at approximately N3 million. Arise News reports that prior to the commencement of operations by Air Peace, a one-way Lagos/London ticket cost N3 million and N11 million for Business Class.

    Fierce competition from Air Peace, forced British Airways to cut its prices to N1.7 million for economy tickets and N6.8 million for Business Class tickets respectively. Equally, Virgin Atlantic which sold economy tickets at approximately N2 million for Economy, N5 million for Economy Premium and N12 million for Business Class on the same route; now sells economy class tickets at N1.5 million, Premium Economy at N3 million and N6 million for Business Class tickets.

    Whilst these dynamics demonstrate the effectiveness of competition and market forces, it represents the makings of what an effective BASA between Nigeria and the UK could resemble in the future. It is very early days and the skew on that particular route is still very much in the UK’s favour. Because two UK airlines service the Lagos/London and Abuja/London routes as against a singular Nigerian airline (Air Peace) which only began operations on that route barely six weeks ago!

    Still, real questions linger over the Single African Air Transport Market (SAATM), an essential component of Nigeria’s BASAs. SAATM is a seminal initiative of the African Union’s Agenda 2063, which aims to establish a single unified air transport market on the continent, liberalize civil aviation, catalyse Africa’s trade and socio-economic cohesion, pursuant to the 1988 Yamoussoukro Declaration. Whilst SAATM’s aims are noble, in practice, its yielded precious little economic gains to Nigeria.

    For instance, Nigeria has over 20 foreign airlines operating across Lagos, Abuja, Port Harcourt and Kano, including Air Maroc, Egypt Airways, Ghana Airways, Rwanda Air etc. Yet, the country has just a few domestic carriers across West-African countries. What then is the beneficial impact of the SAATM to Nigeria from a bilateral air service agreement perspective? Very little!

    Summing up, neither SAATM nor Nigeria’s 90 plus bilateral air service agreements, currently offer demonstrable, tangible and value-added benefits to the country’s economy not withstanding the subsistence of over 90 bilateral air service agreements. The case for a comprehensive root-and-branch review of all BASAs cannot therefore be overstated. Plus, redundant BASAs which do not offer mutually-beneficial opportunities and the prospects of same, should be scrapped.

    Equally, because Nigeria competes in an international aviation market, it should ensure that it puts its own aviation industry in order by ensuring clear and consistent terms of engagement for all operators; embed free market principles and concurrently frame policy initiatives to support domestic aviation similar to what other countries are doing.

    For example, the International Air Transport Association (IATA), confirmed that governments of wealthy nations supported their airlines post-COVID-19 pandemic, with capital injections, loans, deferred tax payments, deferred tax liabilities and wage subsidies totalling $243 billion. Whilst U.S., European and some Asian airlines benefitted the most from these generous government-support schemes, African and Latin American airlines gained the least.

    Given those precedents, necessary and pragmatic policy decisions by Nigeria to support domestic airlines do not necessarily breach free market principles on the grounds of sovereignty, plus preservation of geoeconomic and geostrategic interests. Of course, domestic airlines will still have to compete for market share and this will continue to be a function of their service offerings, safety records, staff competences, reliability, optimal fleet utilisation, comfort, quality, user-friendliness and price competitiveness.

    These are the fundamentals which inform the decision of the average international traveller to opt to fly with airline A or airline B. If these fundamentals are right, Nigeria’s BASAs may sustainably work in favour of domestic airlines and, by extension, the Nigerian economy. The innings are not over and there is still a lot of work to be do.

    Ojumu is the Principal Partner at Balliol Myers LP, a firm of legal practitioners and strategy consultants in Lagos, Nigeria, and the author of The Dynamic Intersections of Economics, Foreign Relations, Jurisprudence and National Development.

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