Federal Ministry of Aviation AEBF White Paper 2.0 Facilitated by DR Aduloju WFG

STIMULATING SUSTAINABLE
AVIATION INDUSTRY GROWTH
AVIATION EXECUTIVE BUSINESS FORUM

WHITE PAPER
FEDERAL MINISTRY OF AVIATION
Aviation Executive Business Forum White Paper
As we gradually transit into a new era of

aviation business, this government is ready to make
sure that those turning the wheels of the industry do
so with ease. At the end, we want to build an
economic engine that offers a decent ROI to
everyone who has a stake in the industry.
We invite the private sector to take the cockpit
while Government clears you for takeoff
2015 FEDERAL MINISTRY OF AVIATION
AVIATION EXECUTIVE BUSINESS FORUM

WHITE PAPER
TABLE OF CONTENTS
INTRODUCTION ................................................................................................................................................................. 4
1.0
NIGERIAS AVIATION COMPETITIVE ADVANTAGE......................................................................................... 5
1.1
THE GLOBAL AVIATION INDUSTRY ..................................................................................................................... 5
1.2
KEY TRENDS IN AIRLINE OPERATIONS .............................................................................................................. 5
1.3
KEY TRENDS IN AIRPORT INFRASTRUCTURE .................................................................................................... 8
1.4
KEY TRENDS IN AVIATION REGULATION ......................................................................................................... 9
1.5
NIGERIAN AVIATION INDUSTRY IN CONTEXT OF GLOBAL TRENDS ....................................................... 11
1.6
OPEN AFRICAN SKIES: STRATEGIC IMPERATIVES ......................................................................................... 14
2.0
THE REBASED NIGERIAN ECONOMY IMPLICATION FOR THE AVIATION INDUSTRY......................... 15
2.1
MAXIMISING THE OPPORTUNITIES OF A REBASED ECONOMY................................................................ 18
2.2
THE NEED TO ENSURE AVIATION INDUSTRY STABILITY FOR ASSET BASE GROWTH .......................... 18
2.3 GOVERNMENT INTERVENTIONS OPTIONS TO-DATE TO SUPPORT AVIATION

INFRASTRUCTURE ............................................................................................................................................................. 19
2.4
INCREASING FOCUS ON ALTERNATIVE FINANCING METHODS .............................................................. 20
2.5
DEVELOPING NIGERIAN AVIATION LOCAL CONTENT AND GROWTH FUND ..................................... 21
2.6
AN AVIATION GROWTH FUND: PRIVATE EQUITY ....................................................................................... 22
3.0
THE NATIONAL STRATEGIC POLICY FRAMEWORK AND ECONOMIC STIMULUS ................................ 24
3.2 AVIATION INDUSTRY EFFECTIVENESS: MANAGING PERFORMANCE AND

EXPECTATION ................................................................................................................................................................... 26
3.3
NATIONAL AVIATION INDUSTRY ECONOMIC STIMULUS .......................................................................... 26
3.4
NATIONAL AVIATION INDUSTRY ECONOMIC STIMULUS ACTION PLAN .............................................. 28
3.4.1
AVIATION PUBLIC SECTOR FUNDING .......................................................................................................... 29
3.4.2
MOBILIZATION OF PRIVATE CAPITAL FOR THE AVIATION INDUSTRY ................................................. 30
3.4.3
OTHER BROAD POLICY INTERVENTIONS THAT ENHANCE STIMULUS ACTION PLAN ...................... 31
3.5
JUSTIFICATION FOR NIGERIAS REGIONAL AVIATION HUB ..................................................................... 32
3.6
JUSTIFICATION FOR GROWING BUSINESS AVIATION ............................................................................. 33
3.7
JUSTIFICATION FOR BUILDING A NATIONAL FLAG CARRIER ................................................................... 35
3.8
NATIONAL FLAG CARRIER SELECTION CRITERIA ......................................................................................... 37
4.0
CONCLUSION ...................................................................................................................................................... 39
Introduction
The objective of the AEBF was to bring together Aviation Industry Business Executives,
Captains of Industry and Heads of Government Aviation Departments and Agencies to
discuss, debate, deliberate and craft strategies for stimulating sustainable industry
growth and development.
The epoch setting event was successfully conducted under the leadership of the Federal
Ministry of Aviation and landmark industry discussions and resolutions were made that
would have a significant impact on the Industry Policies and Strategic Framework
going forward.
This white paper articulates the core elements and critical issues of the AEBF, presented
in thematic areas for the purposes of mobilising stakeholders to action, facilitating
robust policy decision-making, inspiring intergovernmental action and catalysing
aviation business leaders to become key drivers of sector growth and sustainability.
DR. TAYO ADULOJU
Director, Institute of Workforce Development, Workforce Group
Senior Fellow, Harvard University, J. F. Kennedy School of Government
Telephone: 07042444444
Email: tayo.aduloju@workforcegroup.com, tdaduloju@gmail.com
1.0
Nigerias Aviation Competitive Advantage

The Nigerian Aviation Industry has the economic, geographic and market traffic
potential to be strategically positioned to be the most profitable Regional
Aviation Hub on the African Continent. This was the unanimous consensus of
leaders of the Industry at the AEBF. The demand of the stakeholders was for a
comprehensive and integrated national aviation strategic policy framework
that specifically leverages the countrys unique potential, supported by a
commitment of the Government to build a World Class National Aviation
System that will rival any other in the Global Economy.
1.1
The Global Aviation Industry

The Global Aviation Traffic represents $2.4trillion (that is, 3.4% of the global
GDP). With world passenger traffic growing by 6%, and world Freight Traffic
growing by 7%, the Global Aviation Industry has undergone transformation
over the last 40 years with an increasing number of passengers and cargo
volumes. There has been a substantial increase in the choice of travel options
by destinations as evidenced by the travel frequency. This accentuates the
need for greater competitiveness, which was brought about by airlines
operating their business models at lower costs, higher safety, higher efficiency
and a smaller environmental footprint per passenger mile travelled than ever
before.
For Nigeria to maximize its full potential and develop national aviation
competitive advantage it must take into account emerging trends in Airline
Operations, Airport Infrastructure and Aviation Regulation.
1.2
Key Trends in Airline Operations

In recent times, global airline business has been characterized by a period of
fierce competition, market consolidation and network expansion with the
underlying volatility of fuel prices.
a)
Market Consolidation: Consolidation has been employed by the global

climate as a key strategy for sustained competitive advantage in todays
mature market. Increasing liberalization and growth of Low Cost Carriers
has resulted in the use of consolidation strategies by airlines in mature

markets in battling competition.
Due to consolidation, revenue share has increased as follows:
-
North America (3 mega airlines): 55%
Europe (3 mega airlines): 57%
South America (3 mega airlines): 67%
Middle East and Africa: 58% (this is more likely due to aggressive
growth by gulf countries)
Asia: reduced to 28% (e.g. Singapore has deregulated and have

more airlines coming in)
b) Growth in Low Cost Carriers (LCCs): LCC penetration into emerging

markets has made air travel more accessible for passengers leading to
increasing air and passenger traffic. The rapid expansion of Middle East
hub carriers has changed intercontinental travel patterns, changing air
connectivity patterns. More people are flying LCCs leading to an increase
in LCC traffic over FSCs. Thus gap in traffic growth between LCCs and Full
Service Carriers (FSC) is slowly closing.
c)
Gulf Carrier Expansion: Using its geographical advantage and financial

resources, the Persian Gulf has transformed itself into the main hub for
international air travel. Possessing a commanding presence in the AsiaEurope routes, big-name Gulf carriers such as Emirates Airlines and Qatar
Airways are poised to expand sharply in other global markets, overtaking
other sixth freedom carriers such as Singapore Airlines and KLM.
The Implications are as follows:

-
Traffic has moved from Far West To Far East. They capitalized on
geography.
It is predicted that by 2020, Dubai passenger traffic will exceed

Heathrows.
Passenger numbers for Singapore Airlines and KLM are less than that
of Emirates.
UAE and Emirates have signed an agreement with Angola to build an

airport outside Luanda. Ghana has commissioned national carrier
initiative.
d)
Volatile fuel prices: Airlines exposure to volatile oil prices greatly

reduces their cost allocation capabilities as fuel costs account for the
bulk of operating cost. The percentage of fuel cost in operations has
been on the increase over the years. This exposes airlines to volatility
in oil prices reducing cost planning capabilities. Hence, the need to
look at how to synchronize supply chain. Be proactive not reactive.
1.3
Key Trends in Airport Infrastructure

The privatisation of Airport infrastructure globally is on the rise as evidenced
by an increase in refinancing activities and the diversification of revenue base.
a)
Infrastructure
privatisation:
Airport
privatisation
deals
were
estimated at $21bn globally from January 2012 to September 2014.

South America has been the main region for airport privatisations
since January 2012, accounting for US$17 billion of the US$21 billion
globally from January 2012 to September 2014. This is expected to
result in improvement of airport infrastructure globally.
b)
Refinancing activity: There has been a steady increase in refinancing

activity driven by the recovery in air travel hence the need for
renegotiated debt financing.
There has been a resurgence in
refinancing activity, largely to replace acquisition debt raised pre- crisis

as airport owners take advantage of improved trading conditions
driven by recovery in air travel and increased availability of debt
financing. There are economies (e.g. Ireland) whose revenue is largely
based on airline/ air transport revenue.
c)
d)
Increasing focus on non-aeronautical revenues: In recent times,

airports are focusing on customer experience by being more creative
with airport services and generation of non-aeronautic revenue. In a bid
to increase internally generated revenue, airports designs are
increasingly including non-aeronautic value-adding services. The Table
below illustrates the migration of Revenue to Non-Aeronautical income
streams.
Goal
1970
Handle aircraft and
passengers
1990
Increase revenue and
profitability
2014
Reduce dependency from aviation
business cycles
Target Customer
Passengers
Passengers
Beyond Passengers
Revenue from NonAeronautic
<5%
>30%
>70%
Slow growth and reduced

margins from cost pressure
Conclusion
1.4
Higher margins but still

high dependency from
aviation business cycles
Broad, risk-reduced portfolio of

diverse income streams
Key Trends in Aviation Regulation

Global aviation regulation has been centred on market liberalisation while also
maintaining a fair playing ground for all stakeholders.
a) Market Liberalisation: The liberalization of international air transport
regulation has continued to evolve aiding increased air network coverage.
In the past decade, about 1,000ASAs (including amendments and/or
memoranda of understanding) were reportedly concluded globally. Over
70% of these agreements and amendments contained some form of
liberalized arrangements. By 2014: 58.9% of flight frequencies offered
are through open skies; 35.5% Offer country-pairs with non-stop
scheduled passenger air services (illustrated in the Table below).
No. of
1995
1999
2004
2009
2012
31.60
37.50
46.10
57.10
58.9
7.90
22.80
32.10
35.5
Frequencies %
No. countrypairs routes.%
b) Competition Policies: As liberalization spreads, the question of how to

maintain and promote fair competition in air transport is increasingly
becoming an issue. The frequency of use of competition laws for air
transport has increased, presenting a variety of issues. This means the
question of how and what regulations to impose will be the key focus of
regulators, while airline operators will need to develop expansion
strategies within the confines of regulations. Biggest Issues:
Capacity dumping
Predatory pricing (the bigger, the easier to absorb shocks and thus kill
smaller competition)
Predatory pricing
Airline coordination & alliances (people gravitate to particular
airlines)
10
c)
Consumer Protection Policies: Ensuring adequate protection of all

stakeholders especially airline customers has become an essential part of
todays effective regulation. Concerns about the limits of competitive
response have induced a number of States to ask the industry to develop
voluntary commitments (non-legally binding self-regulation) and/or to take
some direct regulatory measures that address consumer interest issues such
as denied boarding compensation, flight cancellations and access for
incapacitated passengers.
d) Safety: The review of safety in the aviation industry due to the recent
spate of crashes has led to an increased investment in state-of- the-art
security equipment and crew trainings. Commercial aviation is in the middle
of its deadliest year since 2010, with the recent spate of air disasters
making an abrupt break from three straight years of decline in airplane
fatalities.
Recent air crashes in recent months, all involving Asian airlines, have cast a
shadow following a record year for air safety in an industry that has
invested heavily on crew training and modern security equipment.
2009
2010
2011
2012
2013
2014
Number of accidents
102
104
118
99
90
12
Number of fatalities
655
656
372
388
173
761
Table: Scheduled Commercial Flights Accident Records
1.5
Nigerian Aviation Industry In Context of Global Trends

Currently the Nigerian Aviation accounts for 14.6 million Passengers handled by
the airports in 2013. There have been 17 entrants with 7 defunct in the past
(10) years. The Aviation Sector is 1.4 % of GDP Estimated contribution to
Nigerias GDP and 159,000 estimated jobs supported by the industry. The
current cargo traffic is estimated at 219,300 Tonnes of cargo lifted in 2013,
with 10 scheduled domestic airlines with 3 Nigerian airlines operating on
International Routes and 21 foreign airlines operating in Nigeria.
a) Airline Operations: The Nigerian Aviation, Foreign Airlines dominate

International travel in Nigeria and account for 90% of passenger traffic. (92%
of passenger traffic is international, 8% domestic; traffic originates in Kano,
Port Harcourt, Abuja, Lagos and others; majority is Lagos). The Domestic
11
12
Market centers around two major players (Arik, Aero) who account for 89% of
seats.
b) Airport Infrastructure: Majority of airport infrastructure in the country are
Government owned with most being significantly under-utilized. Only 4 airports
are privately owned out of the 22 existing in Nigeria. 75% of passenger
traffic is from 3 airports - Lagos, Port Harcourt and Abuja in the past 5 years.
In 2011, over 90% of the revenue earned was from 2 airports Lagos and
Abuja. This indicates that majority of the airports in Nigeria are significantly
under-utilized.
c) Regulatory Services: Over the years, strategies are being developed to

strengthen the role of regulators in aviation with an increasing focus on safety
and consumer protection. Some areas of regulatory reforms include: The
Aviation Master Plan to provide strategic focus for the industry; the Nigerian
Civil Aviation Authority Consumer Protection Unit establishment of consumer
protection desks across airports; Increased acquisition of modern airport safety
and security equipment in all airports. The Aviation Master Plan also proposes
legislative changes to enhance regulator enforcement powers. Regulatory Focus

of Nigerian Aviation Master Plan include:
Safety and Security
Consumer Protection
Bilateral Air Service Agreements
National Flag Carrier
To be competitive, Nigerian Aviation must benchmark global players that have

exploited the Hub Potential that the country seeks to optimize. Some of these countries
and their general industry outlay are illustrated below:
DUBAI (UAE)
Proposed capital
investment
$7.8 Billion airport expansion

plan
GDP Contribution
Active Airlines
$26.7 Billion (2013), 27% of

GDP
416,500 (21% of Total
employment)
Over 150
National Carrier
ETHIOPIA
BRAZIL
$300 Million airport

expansion plan
Fleet expansion
$17 Billion (2013), 37.5% of
GDP
-
21
Emirates
Ethiopian Airlines
TAM Linhas Aereas
Hub Airport
Dubai International Airport
Bole International Airport
Infrastructure Ownership
structure
Success Factor
Government Owned
Government Owned
Guarulhos International
Congonhas-So Paulo
Braslia International
Viracopos International
Airport
Government and PPP
Government Funding
Government awareness of
aviations economic
importance
Aviation policy favouring
open competition among
airlines
Well-structured investment
strategy
Focus on growth and
underserved markets.
Jobs Supported
Government awareness of
aviations economic
importance
Non-interference of the
government in the
operations of the airline
Establishment of ASAs
Increasing investment in
Aviation Infrastructure
$ 31 Billion (2014)
845,000
Privatisation of Aircraft
manufacturing industry
which resulted in
increased productivity
Easy access to Aviation
infrastructure
These cases point to focus of Government in creating very specific national

competitiveness.
a) UAE: Increased government focus on aviation. 15.2% growth; highest
passenger traffic growth in the world.6.8% growth; Highest Cargo traffic
growth in the world.
13
14
b) Ethiopia: Increased focus on domestic aviation capability development. 77% of

Seat capacity provided by Domestic Airlines. 77 Passenger planes; 2nd
strongest fleet in Africa.
c) Brazil: Increased focus and investment on aviation manufacturing capability.
37% of all new aircrafts ordered domestically. 4th Largest Aircraft
Manufacturer in the world in deliveries.
1.6
Open African Skies: Strategic Imperatives

Open African Skies holds strategic regional competitive industry advantage for
Nigeria, with attendant commitments of the Federal Government to develop
Africas leading and most competitive Aviation Hub. Currently, African aviation
share of global traffic is very small at around 3%. The West and Central
Africa region is the worst served in terms of connectivity and tourism. None of
the major airline hubs feature in West and Central African region. Industry
Consolidation and Strategic Partnerships maybe the key to halting the failure
rate of Nigerian and indeed African Airlines.
It is a foregone conclusion by Regional Stakeholders that Nigeria is punching

below its weight, as it is geographically and socio-economically positioned to
take on the leading aviation industry role in the Region. The Federal Republic
of Nigeria is the largest economy in Africa with over 170 million people. In
terms of aviation, it does not correspond with the size of the economy or the
size of the population. For example, the Murtala Muhammed International
Airport is only the 5th largest in Africa based on the number of passengers, so
the potential is here. To achieve this leading regional role, the Federal
Government must lay out a more ambitious Aviation Vision, supported by the
building of a World Class Aviation Industry System that caters for Africas
need.
This potential must be fully developed. Beyond building World Class Airline
Operations, Infrastructure (which need to match those from other regions, e.g.
Dubai, Singapore, Paris and Amsterdam), Nigeria may need to play a leading
role in West African Economic Integration that removes the Barriers to the
movement of traffic such as visa requirements and onerous customs clearance
procedures for cargo need to be streamlined, ensure that African States need
to attain and maintain global safety and security standards (The poor safety
perception in some African States tarnishes the image of all States).
One of the imperatives of an African Aviation Hub is to make Air Travel
Accessible to all. The operating cost of Aviation is very high and Nigeria still
needs to do a lot to reduce the cost of doing business. Passenger charges at
many stations in Africa vary between $40-$80 which is way above world
average. The price of fuel in Africa is about 21% above world average, which
negatively affects the competitiveness of African aviation. The cost of air
transport has a direct influence on the cost of tourism products and indeed on
the consumers choice of destination. Aviation is a critical tool for the social and
economic development of states. Nigeria with its fast growing economy, middle
class and population stand to significantly gain from safe, reliable and
economical air transport services.
2.0
The Rebased Nigerian Economy Implication for the Aviation Industry

The Nigerian Aviation sector contributed 0.09% (NGN 59 billion/USD 450mn)
to Nigerias GDP in 2013 compared to 5.4% of Singapore's GDP and 0.5% of
Indias GDP. Air passenger traffic in Nigeria has more than tripled between
2004 2013, from 4 million passengers a year to approximately 14.64
million a year. USD 870m has been invested over the last 5 years in
upgrading/remodeling airport infrastructure across the country, with over
15
16
US$5 Billion in Aircraft Investments. The Nigerian Aviation Sector is in Need of

Investment, the sector is largely under-budgeted for as illustrated by the
annual budgetary allocation below:
Min. of Aviation (Bn NGN)

FAAN Allocation (Bn NGN)
Provision of airport /
aerodromes (Bn NGN)
2014
31.29
19.68
2013
51.81
24.90
2012
41.55
4.12
32.25
2011
26.30
21.07
0.39
Table: Federal Government Budgetary Allocation to Airports*
Comparatively to other Aviation Economies as already noted. The Nigerian

Aviation Industry is doing less than its potential.
Country
Nigeria
South Africa
Kenya
Egypt
United States
No of Airports / Airfields **
54
566
197
83
13,513
Table: Number of Airports (2013)
Nigerias GDP increased by 89.22% in 2014 to USD509bn (rebased) from

USD269.5bn in 2013. This makes Nigerias economy the 26th largest economy in
the world, and the largest economy in Africa, ahead of South Africa. The
percentage contribution of the Nigerian Aviation Sector to GDP is still very low
when compared to the Aviation sector in Brazil, India, Singapore, Egypt, and
South Africa.
The sector if properly optimised should contribute more to GDP, than its current
US$0.45bn GDP Contribution, given the population of Nigeria and also the fast
growing economy, which has increased business and leisure travel across the
country.
Country
Absolute
Contribution to
GDP
% Contribution to
GDP
Contribution to GDP
utilizing Nigerias GDP
Singapore
US$10.36
5.4%
US$27.54bn
South Africa
US$2.8bn
0.8%
US$4.08bn
Brazil
US$10.45
1.0%
US$5.1bn
India
US$5.3bn
0.5%
US$2.55bn
Egypt
US$1.98bn
1.2%
US$6.12bn
Table: A comparative analysis of Aviations contribution to Nigerias GDP vs. other emerging and African economies *
17
16
12.5
8.3
8.25
8.45
8.1
10.8
10
14.64
12
13.98
14
14.11
Annual Passenger Traffic by Air, 2004-09

14.75
18
2004
2005
2006
2007
4
2
0
2.1
2008
2009
2010
2011
2012
Maximising the Opportunities of a Rebased Economy

While the rebased economy holds its inherent opportunities including an
economic environment that correlates with growth in the sector, it will take a
more proactive Aviation Policy Framework to increase economic output, create
opportunities and increase the attractiveness of the sector to investors.
Notwithstanding the rebased economy, Nigeria still faces the impact of
monetary and fiscal challenges. The combination of the Naira devaluation and
falling Global Oil Prices will continue to have a significant impact the sector, as
expenses are US dollar denominated. It is imperative for industry stability that
the aviation sector and specifically the Airline companies develop a stable FX
plan. On the other hand the decline in Naira affects business as revenues are
denominated in Naira.
2.2
The Need to Ensure Aviation Industry Stability for Asset Base Growth
Asset Base growth is driven by the capital inflow into the sector. Capital inflow
requires a range of attractiveness indicators, hence dependent on the stability
of the economy. In a growing economy, there will be increase in assets as
2013
passengers grow. Funding to expand assets will also be cheaper and easier to
access in a growing economy. Hence, the rebased economic benefits will accrue
to the sector through deliberate interventions to create a more sustainable
aviation industry.
A notable Aviation Industry Intervention by the Federal Government of Nigeria,
as Crisis protection measure. The Federal Ministry of Finance on the request of
the Ministry Aviation, through its vehicles in a bid to protect the Nigerian
aviation sector from crisis have intervened in the past by providing low interest,
long term funding to finance operations. The 300 Billion Intervention fund is
governed and regulated by the Central CBN and managed by Banks/
Development banks:
Disbursed N116.9bn
Fund Size N300bn
Interest Rate 7%
Manager BOI
Year 2009
In an earlier intervention the Asset Management Corporation of Nigeria
(AMCON) under the CBNs risk based regulatory response to toxic assets and
bad loans in the Banking and Financial Sector saw the Aviation industry receive
some financial intervention estimated at about $1Billion.
2.3
Government Interventions Options To-Date to Support Aviation

Infrastructure
The
Federal
Government
has
also
implemented on interventions to support

Aviation Infrastructure. They include:
a)
Public
Private
Partnerships (PPP): The PPP model has

been applied by the Ministry of
Asaba International Airport
Aviation with some success towards

building up airport infrastructure in
Nigeria;
19
20
b) Concession: Concessioning of aviation infrastructure to the private sector

by the Ministry of Aviation has achieved modest gains;
c) Contracts: This has been the traditional means of building up infrastructure,
but has proven very expensive as government bears all the funding
responsibility
Increasing Focus on Alternative Financing Methods

The aviation industry globally has seen record aircraft orders driven by the
operational needs of airlines as global travel increased over the last decade.
Airline financing was hitherto expensive as regulatory changes globally and
prevailing economic conditions made available capital for airlines scarce,
however,
the current
environment
of low interest
Government
and theeconomic
Aviation:
Sector Financing
Status rates globally and
Increasinguncertainty
Focus on Alternative
Methods
economic
has made Financing
the aviation
sector an attractive alternative to
The aviation industry globally has seen record aircraft orders driven by the operational needs of airlines as global travel increased over the last
decade.
Airline financing, was hitherto expensive as regulatory changes globally and prevailing economic conditions made available capital for
new
investors.
airlines scarce, however, the current economic environment of low interest rates globally and economic uncertainty has made the aviation
sector an attractive alternative to new investors
Despite the importance of this class of financing, it has experienced limited acceptance
primarily because of an absence of domestic institutions that can drive its use
Private
Equity
Increased valuations in Nigeria /
African capital markets. NSE Market
Cap currently US$50.86bn
Cold
Lukewarm
Very Active
Private
Mezz
Equity
Debt
Bank
Debt
Private
Placing
Stock
Market
Listing
Mezz
Debt
Lease
Finance
Corporate
and Project
Funding
Public
Africa focused PE raised US$3.3 bn in

2013. Funds expected to be
channeled towards Equity /
Mezzanine opportunities
Mezzanine
Private
Equity
Public
2.4
No listed airline
company on the
NSE
Bonds
Mezz Debt Is gaining popularity.

Most investing institutions in airline
companies however still prefer the
use of Lease financing
Lease financing requires the
producers of the aircraft to partly
finance the purchase of the aircraft
and is common in developed markets
Although popular, it is quite

expensive (18% 27%). Nigerian
bank balance sheet - > US$118bn
The rise in bond yields to 15% from c.
13% in 2014 has muted the call for
increased corporate bond listings.
The FGN currently has US$26.9bn of
Bonds outstanding.
Source: CBO Research, Central Bank of Nigeria, Debt Management Office, Nigerian Stock Exchange, Ex-Rate: NGN156 to US$1
Source: CBO Research, Central Bank of Nigeria, Debt Management Office, Nigerian Stock Exchange, Ex-Rate: NGN156 to US$1
Despite the importance of the Mezzanine class of financing, it has experienced

limited acceptance primarily because of an absence of domestic institutions that
can drive its use.
Page 13
2.5
Developing Nigerian Aviation Local Content and Growth Fund

The Federal Government of Nigeria is already reaping the benefits of Local
Content in the Oil and Gas Sector and it is the view of stakeholders that the
Aviation Sector is ready for a similar type of Intervention. A range of Nigerian
Aviation Content Development interventions have been recommended:
a)
Enact laws to protect advantage/provide opportunity for local airline

companies
b)
Create incentives for companies with indigenous manpower
c)
Create framework for technical knowledge transfer to local companies
d)
Create special educational institutions to cater to the industry
The envisaged impact of these interventions would include:

a) Job opportunities: Will create employment opportunities Nigerians
b) New Markets: Local technology tailor-made for the Nigerian aviation industry
will create a new market for these products thereby boosting the economy
c) Knowledge Transfer: Dollar based transactions will be curbed as local
companies take advantage of the knowledge transfer
d) Technical Education: Will encourage the building of aviation technical schools
around Nigeria thereby building up local knowledge
Alternate Financing to Drive Upgrade and Expansion will include leveraging Sector
Gaps to provide quite funding solutions that are tailored to meet Aviation Industry
requirements.
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2.6
An Aviation Growth Fund: Private Equity
Growth entails risks

a) Debt is too expensive and short termed for the airline companies
b) Prevailing FX risks in Nigeria makes debt unattractive
c)
PE firms provide more long term and strategic approach
d) PE funds nurture/grow these companies thereby creating value for

investors and the Nigerian economy
National Equity Investments - GDP % is still very low

1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
1.62%
0.89%
0.12%
US
UK
Brazil
India
China Turkey
SA
SSA
MENA
Private Equity Impacts in Companies

a) Matures: Helps companies to mature
b) Multiplier: Companies can raise additional capital
c)
Sustainable: It ensures alignment of interests.
d) Reduces Risk: Reduce a companys leverage

e) Reduce inflation/ asset bubbles
f)
Develop Equity Ecosystem: Equity is Smart Risk Taking
The proposed Aviation Equity Fund could be arranged as follows:

a) The MOA, MOF and CBN will provide seed capital of USD x m from the debt
fund as a 10 year loan;
b) Annual Income: The MOA would invest additional amount for 6 years
c) Third Party Investors: The managers of the fund will seek 3rd party investors
(PFAs, Institutional Investors) of up to 5 times x to scale investments up rapidly;
d) Motivating Lenders: Lenders will be encouraged to lend to AEFs investments
typically offering Debt to Equity at 60/75%, so a multiple of 2 to 3 times.
e) Developmental Interventions: Provide equity capital aimed at facilitating
development of baseline capacity.
f) Fund Management: Fund to be SEC registered and PENCOM compliant.
Managed by a rated local manager.
g) Capacity Development: A portion of the fund will be set aside annually for
capacity development across the entire sector
The Nigerian Aviation Equity Fund can have 20 times the impact of the debt fund. It
will direct funds toward indigenous players and will be accountable to the MOA. A
successful Equity Fund will also attract more capital.
As at 2013, over $5.1 Billion in Aviation Financing came from Private Equity, and
experts project an upward trend in this regard.
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24
3.0
The National Strategic Policy Framework and Economic Stimulus
The AEBF rallied tangible consensus amongst National and Global Aviation
stakeholders that the Nigeria Industry must do things differently. They pointed
to the need for the Federal Government to put in place appropriate policy
interventions, programme initiatives and incentives to simulate sustainable
growth.
Central to the policy interventions of Government is the urgent need to ensure
that there is sufficient economic stimulus to trigger the emergence of Nigeria as
the leading Regional Aviation Hub on the African Continent.
Economic Stimulus for Aviation will involve a package of financial incentives
and support across the aviation value chain. It will involve having a robust
National Aviation Industry Strategy Framework that will impact on key industry
areas. Including:
a) Aerodrome Infrastructure and Operation
b) Airline operation & safety
c) Aviation allied services
d) Airspace Management
e) Manpower development
3.1
National Aviation Industry Strategic Policy Framework

The commitment of the Federal Ministry of Aviation to create a One Aviation
National System that is founded on an integrated set of strategic choices about
how the Nigerian Aviation Industry will be uniquely positioned within the
Regional and Global Economy. These choices include:
a) The Winning Aspiration to be the Leading Regional Aviation Hub on
the African Continent;
b) To commitment to Build World Class Aviation Infrastructure and
Maintenance Operations to cater for World Class Airline Operations,
which will include Nigeria Carriers, supported by World Class Aviation
Workforce;
c) To implement an Aviation City/Regional Hub Model that leverages

Aviation traffic and its corresponding economic value beyond tradition
passenger income and aviation business cycles to a broader, riskreduced portfolio of diverse income streams.
The envisaged National Aviation System within the current Strategic Policy
Framework must meet and possibly exceed International Civil Aviation
Organization measures, standards and requirements. Hence the Medium Term
Sector Strategic Framework will address all matters of One Aviation
including:
a) Aviation Safety
b) Aviation Standards and Compliance
c) Licensing and Certification
d) Airspace Management
e) Aviation Security
f) Aerodome
g) Aviation Sector Economic Performance (Contribution to GDP, Sector
Multiplier effect etc.)
The implication for Aviation Industry Governance is that a more performance
and result-oriented sector is essential. Therefore, expanding our National
Capabilities in tracking and improving Airline Operational Efficiency, Aircraft
Maintenance Operations and overall industry performance is critical to success,
as Nigeria expands its fleet and infrastructural capacity.
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26
Key Public Impact Areas that the Strategic Policy Framework will deliver on
include:
a) Aviation Safety
b) Passenger Comfort and Rights Protection
c) Industry Compliance
d) Total Aviation Domain Surveillance
e) Regulatory Operational Efficiency
f) Aviation Security Threat Response Readiness
g) Fleet Airworthiness
h) Industry Standardization
3.2
i)
Industry Growth and Significant Contribution to GDP
j)
World Class Aviation Labour
Aviation Industry Effectiveness: Managing Performance and Expectation

Driving Aviation Industry Effectiveness will include:
a) A Clear Vision for the Industry that articulate a winning aspiration
b) Effective Leadership in Business and Government
c) Effective Implementation
d) Effective Performance Management (Systems, Processes and Tools)
e) Resources
f) Strong Communications Systems
g) Public Expectation
3.3
National Aviation Industry Economic Stimulus

Global Aviation is a heavily stimulated Industry. Delta Air Lines, American
Airlines Group and United Airlines collectively received over $40 billion in
subsidies in the last decade. In the ongoing debate about National Aviation
Competitiveness, US Airlines have pointed to the degree of economic
stimulation that their competing counterparts around the world are getting.
a) QATAR Breakdown of government subsidies:

i. $8.4 billion in
government loans
and shareholder
advances with no
obligation to have to
repay them;
ii. 6.8 billion in subsidies
from government
loan guarantees
iii. $616 million in airport fee exemptions and rebates
iv. $452 million in free land
b) ETIHAD Breakdown of government subsidies:
i.
$6.6 billion in
government loans
with no repayment
obligation
ii.
$6.3 billion in
government capital
injections
iii.
$3.5 billion in
additional
undisclosed government funding in 2014
iv.
$751 million in government grants $501 million in airport fee

exemptions
v.
Unquantified subsidies from purchases of more than $11

billion in goods and services from other government-owned
companies at not-at-arms-length prices
vi.
$2.4 billion from government assumption of fuel hedging

losses
vii.
$2.3 billion from subsidized airport infrastructure
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Even though the Emirates Airline is putting together a top team from its legal, strategic
and financial departments to respond to allegations made by US airlines that it had
used unfair business methods to become one of the leading forces in global aviation,
one thing is clear from these figures. In whatever form or structure, Global Aviation has
received significant government economic stimulus.
Nigerian Aviation Industry is under performing, with our current GDP = N80.3 trillion
($509.9bn), Aviation contribution is $0.7 billion. This is due to aforementioned gaps:
Untapped regional opportunities to become hub of West Africa; Weak corporate
governance in the industry; Poor incentives for Private sector participation; Underutilized BASA agreements and under financed domestic airlines. Compared to other
Aviation Economies, Nigeria lags behind Dubai: (27% Contribution to GDP) and South
Africa (2.1% Contribution to GDP). It is therefore overstated that Nigeria as a nation
with comparative advantage is underfunded.
Strategically located Nigeria with is rich domestic market size and demography is:
a) 5.5hrs to UK
b) 7hrs to UAE
c) 9hrs to Brazil
d) 13hrs to USA
To maximize these advantages, Nigerian Aviation must attract at least $15 Billion over
the next three years.
Nigerian Aviation Investment climate: Current Opportunities
Projected Traffic
Investment
Requirement
3.4
Short-Term (2018)
19 million passengers
Mid-Term (2020)
25 million passengers
USD 15 billion
USD 25 billion
Long-Term (2043)
110 million
passengers
USD 50 billion
National Aviation Industry Economic Stimulus Action Plan
Specific Government Interventions with respect to stimulating the Aviation

Industry going forward will include:
a)
Stimulate increased Foreign Direct Investment into the industry;
b)
Reduce Industry Risk and expand Credit and Aviation Finance tailored
to Sector Requirements;
c)
Stimulate Equity Investments through attractive and competitive

Incentives across the Aviation Value chain;
d)
Stimulate and facilitate Local Direct Investment into the industry;
e)
Facilitate Government intervention and Guarantees to boost Industry

Performance.
3.4.1
Aviation Public Sector Funding
To achieve the above stated interventions, the Federal Ministry of Aviation

working with relevant Ministries, Departments and Agencies of Government will
explore the most exhaustive funding vehicles available to the Industry from
time to time. In terms of Public Sector Funding, the basic levels of government
capital funding will be explored (however, since this has already been deemed
insufficient, will not be the mainstay of the focus on this administration). As
noted from how other nations have stimulated the aviation sector. Government
will explore the following:
a) Stabilized financing of Infrastructure from government budget;
b) Effective Use of the resources of the Sovereign Wealth Fund (SWF) for
direct investment in aviation infrastructure projects and use of these
funds to leverage resources from other sources as already stated
earlier in this submission;
c) Concerted efforts to increase revenues from infrastructure services by
improving substantially the recovery costs of service provision from
service users;
d) To meet some needs of the Aviation Infrastructure Programme,
Government could raise funds through the capital market through the
issue of bonds, and apply the associated proceeds to fund critical
aviation infrastructure projects.
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3.4.2
Mobilization of Private Capital for the Aviation Industry
As already noted, the main sources of private capital will be equity of the
participating investors, and debt mobilized in the domestic and international
markets at concessionary rates that are in tandem with the long term funding
requirements of the Aviation Industry.
a) The aforementioned Aviation Equity Fund will be fully explored and a
range of sources of equity will be mobilized including: venture capital,
special purpose Aviation infrastructure funds designed by large global
insurance and pension fund managers;
b) Pragmatic expansion of Aviation Industry Funding Frameworks. A
number of options are available in this respect to facilitate the
involvement of the domestic banking sector in the aviation economic
stimulus programme:
i.
Creative engagement with Asset Management Corporation of

Nigeria (AMCOM) to provide more proactive financing
intervention across the Aviation Value Chain;
ii.
Encouraging a Consortium of domestic banks to issue aviation

infrastructure bonds with a Central Bank Guarantee and lend
the proceeds directly to aviation project entities that have
acquired the same as Public Private Partnerships;
iii.
Expanding the Role of Development Finance Institutions (DFIs)

in Nigeria;
iv.
Expand Current Aviation Intervention Fund Model: which is

basically Central Bank investing in the Bank of Industry to onlend through Deposit Money Banks (DMB) to qualified
borrowers at a concessional interest rate;
v.
The Bank of Industry and the Infrastructure Bank Plc. could

issues Aviation Infrastructure Bonds on behalf of the Federal
Government or with a government or CBN guarantee, and onlend the proceeds to PPPs and Infrastructure companies;
vi.
DFIs may provide concessional loans for on-lending to PPP,

Concessionaires of Aviation Infrastructure Projects;
vii.
SWF could consider the provision of guarantees to commercial

banks for extended loan maturities to say 15-20 years, along
with funding that covers the cost differential between the
market-based prime interest rate and discounted rate that
would be available for long term investments in aviation
infrastructure;
viii.
Commercial Bank Groups have expressed the desire to issue

long term (10-15 year) bonds in the domestic and foreign
market on commercial terms to provide relatively longer-term
financing
for
aviation
infrastructure
development.
The
Commercial Banks will require the CBN to provide credit

enhancement in form of credit guarantee.
c) Leveraging the National Pension Fund: The revised regulations on the
investment of pension fund assets includes in its list of allowable
instruments, infrastructure funds registered with the Securities &
Exchange Commission with a Portfolio limit of 5% of the infrastructure
funds.
3.4.3
Other Broad Policy Interventions that Enhance Stimulus Action Plan
Broader Policy Intervention with respect to sustainable Industry growth will include:
a) Setting up Aviation Corporate Governance and Enterprise Risk
Framework to reduce the probability of Aviation Corporate Failures
due to moral hazard;
b) Creation of a more robust and conventional national/flag carrier policy
framework to develop a national aviation fleet that can rival the huge
consolidated global players;
c) Review Current Intervention Fund Model and Facilitate a more robust
Aviation Financing Framework;
d) Create a robust regional hub/ aviation city model that drives
commercialization;
e) Stimulate Volume of Funding required to leapfrog the Aviation Industry
into the future;
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f) Liberalize the Skies: Implementing the Yamoussoukro Declaration;

g) Achieving Significant Aviation Nigerian Content Development.
3.5
Justification for Nigerias Regional Aviation Hub

West African Aviation Industry provides the Nigerian Hub Model the impetus it
requires for the justification of the strategic investments it has committed to
pursuing and the development of National/Flag Carrier that will guarantee
that economic benefits accrue to the Nigerian economy. Nigeria as a key
supporter of the Open Skies policy must position aggressively to benefit from
the same. The West African Market consists of:
a) Inter-Continental: the most lucrative market, dominated by foreign
carriers (42% of total market of roughly 8 to 10 million passengers
annually);
b) Intra-Africa: (22%= 4-5 million PAX) market dominated by South
African, Ethiopian and Kenya Airways;
c) Domestic: small market, except for Nigeria with 14 million domestic
passengers (most countries do an average of 10 million domestic
passengers per year).
Market shares (seats) of ECOWAS-registered airlines on intra-ECOWAS flights without domestic Nigerian market, Jan. 2013.
Source: SRSAnalyser
3.6
Justification for Growing Business Aviation

Business Aviation is perhaps the most elegant aspect of air travel with high
premium on comfort, taste and flexibility. It is usually regarded as luxury flying.
However, the fast-pace of some of todays businesses necessitates fast travel.
Business Aviation has become a necessity in Nigeria that must be effectively
harnessed to tap its full economic benefits.
According to the NBAA Definition, Business Aviation is the use of any general
aviation aircraft for a business purpose. The Federal Aviation Administration
defines general aviation as all flights that are not conducted by the military or
the scheduled airlines. As such, business aviation is a part of general aviation
that focuses on the business use of airplanes and helicopters.
Though the Nigerian aviation marketplace has been dominated over the years
by Scheduled Commercial Aircraft operation, Business Aviation has made a
significant impact in the market over the last 5-10 years. It is estimated that
close to 150 business aircraft exist in Nigeria today owned by government,
corporate organizations and individuals. According to the NCAA:
33
34
a.
Over 200 business and private flight clearances are processed by

NCAA monthly;
b)
Over 50 percent of the civil aircraft registered in Nigeria are used for
business and general aviation operations;
c)
More than 80 percent of helicopters registered in Nigeria are used

for business aviation operations;
Aircraft manufacturers, trip management companies and aircraft management

companies have described Nigeria as a market with huge potentials. Business
Aviation activities in Nigeria are most notable at major economic hubs like
Lagos, Abuja, Port Harcourt, etc. Nigeria is laying new emphasis on
establishing dedicated facilities for business/general aviation at major business
aviation hubs including Lagos and Abuja. Helicopter activities are most notable
in on-shore and offshore oil and gas producing regions. The growth in Business
Aviation in Africa most remarkable in Nigeria prompted the setting up of the
African Business Aviation Association (AfBAA) though its counterparts were set
up many years ago in other regions e.g. the EBAA, NBAA, and MEBAA
Overall, however, Nigeria remains one of the largest business aviation markets
in Africa with continued growth expected over the next 15-20 years. Demand
for Business Aviation is principally fuelled by activities in the oil and gas sector.
There are expectations that growth in business aviation in Nigeria would
marginally slacken after the General Election since political activities would wind
down post-elections.
Opportunities exist in all areas of business aviation. These Opportunities in
Business Aviation in Nigeria are yet to be fully exploited. Business Aviation has
potentials to contribute billions of dollars to operators and the Nigerian economy.
This exploitation of available Opportunities tend however to be dominated by
foreign operators, and crew.
The Federal Government therefore intends to accentuate the Business Aviation

Market. Business Aviation is a major contributor to economic growth and
development and should be given adequate political support to thrive. This will
necessitate Business Aviation Policy and Regulation review, supported by
effective enforcement of licenses and Certificates and complete elimination of
illegal operations. The Federal Government will implement necessary strategic
capabilities upgrade to ensure that the technical capacity for effective
regulatory oversight is in place. While providing for adequate capacity, security
regulation should be beefed up in the face of emerging threats.
3.7
Justification for Building a National Flag Carrier
A National Carrier is a Government Owned Airline that has the privileges of being the
International Representative Aviation Carrier of a Country. A Flag Carrier is a
Private/Publicly Owned Airline that represents a country.
35
36
A representative national flag carrier is key and strategic to national aviation success.
The significant consensus of National Aviation Stakeholders, including the Aviation
Operators of Nigeria and the Dominant Domestic Airlines at the AEBF was that State
owned, run and managed Airline Carriers was not a viable business model for Nigeria,
as this particular model had been tested and it had already failed. Built on the back
of good and strong private enterprises, Government must focus organizing the
architecture. The key debate against a government controlled National Aviation
Carrier was that it was already a tried path, we in Nigeria and Africa have come a
long from State-Owned Enterprises.
Several cases of National Carriers failures abound, the AEBF citing cases from India,
Kenyan Air and Brazil experiments, similar to that of Nigerian experiment with the
Nigerian Airways. Some of the largest Airlines in Global Aviation are Flag Carriers
with little or no direct involvement of government in its ownership and management.
Kenyan Airlines is the first successful National Carrier that privatized and transited to
a Flag Carrier Model Entrepreneurial Efficient Airline System. The National
Conference also recommended that the National Carrier Option is not viable.
The nations that currently run successful national carriers leverage it for tourism
development, have economies where there is not a strong enough private sector that
can venture and participate. United States deregulated Aviation in the 1970s; Europe
deregulated Aviation in the 1990s. The general impediment to the National Carrier
Model is the fact that Government has complex interests.
It is an established that the Government Owned Carriers a far behind their Flag
Carrier counterparts, in terms of performance, across all business indicators. The
Industry data clearly shows: Flag Carriers significantly outperform National Carriers in
terms of Return on Investments, Return on Capital, Sales Volume, Organizational
Effectiveness, Operational Efficiency and Business Growth. But successful National
Carriers in Africa do not have viable domestic market.
The Industry Stakeholders asked the Federal Government to set criteria for Flag
Carriers and airlines that meets the criteria. Such criteria will achieve the following
things:
a) Improve Airline Corporate Governance and Enterprise Risk

b) Set the framework for Local Content Development;
c) Set the framework for National Flag Carrier Ownership Structure;
d) Improve the Aviation Operational Business Model;
e) Motivate Domestic Operators to Recapitalize to achieve National Flag Carrier;
f) Raise the Minimum Requirements for Airline Operations in Nigeria;
g) Free up the Government Funding from focus on Airline Ownership to Critical
Aviation Infrastructure
In this regards, the Federal Government will explore a National Flag Carrier Policy
that will include has the following prescribed Airline Operations Structure:
a) Private Owned Domestic Airlines (for example a minimum of 3 Aircrafts);
b) Publicly Owned Flag Carriers (for example a minimum Airline Fleet of 25
Aircrafts);
c) Business Aviation Airlines.
3.8
National Flag Carrier Selection Criteria
The Resolution of the ABEF on National Flag Carrier Selection Criteria consisted of the
following:
a) That Government should not run as a National Flag Carrier Airline;
b) That Private Owned Airlines should not run as a National Flag Carrier Airline;
c) The objective of a) and b) is to ensure that the Ownership Structure that
engenders Corporate Governance, Accountability and Transparency;
d) That a Diversified Ownership that reflects a combination of Institutional
Investors, public investors and private ownership that has an interest in going
public is a major requirement in becoming a National Flag Carrier;
e) That there can be as many National Flag Carriers at meet the set criteria;
f) That the National Flag Carriers will espouse certain inherent national values
that align to the Nigerian Brand.
g) That National Flag Carrier Must Operate an Effective Model.
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4.0
Conclusion
The AEBF therefore successful added value to the Strategic Policy Framework
of the Federal Ministry of Aviation in creating the needed contextual realities
that would form the basis of Government Interventions across the value chain. In
driving performance, the Right Strategy, supported by the Right Structure,
through the Right Process, by the Right People, with the Right Information and
the Right Reward is the key to success.
The AEBF having provided the industry the opportunity to exhaustively review
sector strategies for growth; assess aviation sector structure across all the
industry segments; debate the industry processes that have not worked in the
past; rethink the plans for delivering a world class aviation workforce; clarify
sector information that support evidence-based policy decision making and
outline the incentives for mobilizing stakeholders into action, has been a
resounding success.
Going forward the Federal Ministry of Aviation will be expected to respond to
the debates, discussions and resolutions of the AEBF with a reviewed and more
Robust Strategic Policy Framework that is articulated to effectively stimulate
sustainable aviation industry growth.
39

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Federal Ministry of Aviation AEBF White Paper 2.0 Facilitated by DR Aduloju WFG

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STIMULATING SUSTAINABLE

AVIATION INDUSTRY GROWTH

AVIATION EXECUTIVE BUSINESS FORUM

Aviation Executive Business Forum White Paper

As we gradually transit into a new era of

2015 FEDERAL MINISTRY OF AVIATION

AVIATION EXECUTIVE BUSINESS FORUM

NIGERIAS AVIATION COMPETITIVE ADVANTAGE......................................................................................... 5

THE GLOBAL AVIATION INDUSTRY ..................................................................................................................... 5

KEY TRENDS IN AIRLINE OPERATIONS .............................................................................................................. 5

KEY TRENDS IN AIRPORT INFRASTRUCTURE .................................................................................................... 8

KEY TRENDS IN AVIATION REGULATION ......................................................................................................... 9

NIGERIAN AVIATION INDUSTRY IN CONTEXT OF GLOBAL TRENDS ....................................................... 11

OPEN AFRICAN SKIES: STRATEGIC IMPERATIVES ......................................................................................... 14

THE REBASED NIGERIAN ECONOMY IMPLICATION FOR THE AVIATION INDUSTRY......................... 15

MAXIMISING THE OPPORTUNITIES OF A REBASED ECONOMY................................................................ 18

2.3 GOVERNMENT INTERVENTIONS OPTIONS TO-DATE TO SUPPORT AVIATION

INCREASING FOCUS ON ALTERNATIVE FINANCING METHODS .............................................................. 20

DEVELOPING NIGERIAN AVIATION LOCAL CONTENT AND GROWTH FUND ..................................... 21

AN AVIATION GROWTH FUND: PRIVATE EQUITY ....................................................................................... 22

THE NATIONAL STRATEGIC POLICY FRAMEWORK AND ECONOMIC STIMULUS ................................ 24

3.2 AVIATION INDUSTRY EFFECTIVENESS: MANAGING PERFORMANCE AND

NATIONAL AVIATION INDUSTRY ECONOMIC STIMULUS .......................................................................... 26

NATIONAL AVIATION INDUSTRY ECONOMIC STIMULUS ACTION PLAN .............................................. 28

AVIATION PUBLIC SECTOR FUNDING .......................................................................................................... 29

MOBILIZATION OF PRIVATE CAPITAL FOR THE AVIATION INDUSTRY ................................................. 30

JUSTIFICATION FOR NIGERIAS REGIONAL AVIATION HUB ..................................................................... 32

JUSTIFICATION FOR GROWING BUSINESS AVIATION ............................................................................. 33

JUSTIFICATION FOR BUILDING A NATIONAL FLAG CARRIER ................................................................... 35

NATIONAL FLAG CARRIER SELECTION CRITERIA ......................................................................................... 37

2015 FEDERAL MINISTRY OF AVIATION

Aviation Executive Business Forum White Paper

2015 FEDERAL MINISTRY OF AVIATION

Nigerias Aviation Competitive Advantage

The Global Aviation Industry

Key Trends in Airline Operations

2015 FEDERAL MINISTRY OF AVIATION

Aviation Executive Business Forum White Paper

Market Consolidation: Consolidation has been employed by the global

has resulted in the use of consolidation strategies by airlines in mature

North America (3 mega airlines): 55%

Europe (3 mega airlines): 57%

South America (3 mega airlines): 67%

Asia: reduced to 28% (e.g. Singapore has deregulated and have

b) Growth in Low Cost Carriers (LCCs): LCC penetration into emerging

2015 FEDERAL MINISTRY OF AVIATION

Gulf Carrier Expansion: Using its geographical advantage and financial

The Implications are as follows:

It is predicted that by 2020, Dubai passenger traffic will exceed

UAE and Emirates have signed an agreement with Angola to build an

Volatile fuel prices: Airlines exposure to volatile oil prices greatly

2015 FEDERAL MINISTRY OF AVIATION

Aviation Executive Business Forum White Paper

Key Trends in Airport Infrastructure

estimated at $21bn globally from January 2012 to September 2014.

Refinancing activity: There has been a steady increase in refinancing

There has been a resurgence in

refinancing activity, largely to replace acquisition debt raised pre- crisis

Increasing focus on non-aeronautical revenues: In recent times,

Revenue from NonAeronautic

2015 FEDERAL MINISTRY OF AVIATION

Slow growth and reduced

Higher margins but still