New Carrier: FG, Virgin Reach Agreement
London, Jo'Burg, NY routes for new airline
From Josephine Lohor, Cletus Akwaya in Abuja and Ndubisi Francis in Lagos
After several botched attempts to float a new national flag carrier, the Federal Government yesterday signed a Memoran-dum of Mutual Understanding (MEMU) with Sir Richard Branson, Chairman of Virgin Atlantic Airways, to float a new national carrier.
The new flag carrier, which will be known as "Virgin Nigeria" would attract an initial investment of $50 million, which capital shall be taken according to the agreed shareholding structure which is 49 per cent to the technical partner/core investor Virgin Atlantic Airways and 51 per cent to Nigerian shareholders.
Yesterday's ceremony ended the long search for a new technical partner for the flag carrier for which South African Airways (SAA) had earlier been appointed to float an airline to be called Nigeria Eagle Airline.
However, the deal could not be consummated as the SAA rejected a critical clause in the draft agreement, which made it mandatory for Nigerians to acquire 10 per cent equity in SAA.
"With the appointment of Virgin, it has been agreed that the new flag carrier will bear the name 'Virgin Nigeria" for commercially prudent reason. The airline would be authentically Nigerian, covered by the Virgin brand, which has been quite successful in its various businesses," Minister of Aviation, Mallam Isa Yuguda, declared in an address to newsmen shortly after the occasion which took place at the Nicon Hilton Hotel, Abuja.
Yuguda signed the MEMU on behalf of the Federal Republic of Nigeria while Branson signed on behalf of the Virgin Group of Companies particularly its aviation subsidiary-Virgin Atlantic Airways.
At the ceremony were the Ministers of Works, Senator Adeseye Ogunleye, Communi-cations, Chief Cornelius Adebayo, representatives of private airline operators and other aviation practitioners in the country.
Giving insights into the agreement, Yuguda disclosed that "under the arrangement, Virgin Atlantic is to have 49 per cent equity while Nigerian investors would hold the majority 51 per cent."
The 51 per cent, he stated, would be taken up by indigenous institutional investors through private placements.
He described as remarkable, the mutual undertakings which the Federal Government exchanged with Virgin, saying this would provide a legal framework to protect the respective interest of the two sides in the proposed venture.
"The MEMU we signed today, is to initiate the processes towards the commercial take-off of the airline. In due course, we shall be announcing the inaugural and subsequent flights of the flag carrier. I also signed a letter of indemnity which is intended to safeguard the investment of the strategic investor as well as the other Nigerian institutional investors and Nigerian public (under the Initial Public Offering) against any adverse claim that could result from the activities of the Nigerian Airways Limited (in liquidation) when it was carrying on business as national carrier for Nigeria, "Yuguda added.
The Minister announced that " as a toddler," the new flag carrier was being given a pride of place." In this direction he said five destinations- Dubai, Jeddah, Johannesburg, London and New York had been reserved for the flag carrier during its teething period.
"This decision was premised on the need to provide confidence to prospective shareholders as well as give the new airline enough room to grow and compete with other foreign carriers," he explained.
He said the desire of the Federal Government to make Lagos a regional aviation hub will be strengthened alongside other strategic goals like curtailing capital flight, providing job opportunities for the teeming population and building capacity.
He said with the benefit of hindsight, the Obasanjo administration considered it imperative any airline that would fly the country's flag must be privately funded and managed while government would only act as a facilitator, providing the proper climate.
"Government's concern here must be understood against the background that a flag carrier is a symbol that carries with it pride and sovereignty. Even though privately owned, it remains the collective property of the Nigerian nation and people and its existence must be reflective of this fact," he added.
He, however, regretted the unwillingness of Nigerian Airline Operators to respond to earlier invitations to be part of the flag carrier project but expressed hope that they would avail themselves of the new opportunities offered by the coming of Virgin Nigeria.
Chairman of Virgin Atlantic Airways, Branson who also jointly fielded questions from newsmen after the signing ceremony said the new airline would commence operations early next year upon completion of incorporation procedures and other authorisations from the regulatory agencies in the aviation sector.
He said Virgin Nigeria would bring foreign expertise to help set standards but would recruit over 90 per cent of its total personnel requirements among Nigerians.
The company which, he said, operates its headquarters at the Murtala Mohammed Airport Lagos would create 20, 000 jobs indirectly through its suppliers, partners and other operational activities.
He said the new airline would commence operations with local flights to Abuja, Kano and Port Harcourt, while plying sub-regional routes like Accra, Abidjan and Dakar and covering international destinations like Middle East, the USA and Europe.
Branson disclosed that he had accepted the condition to allow Nigerians take 10 per cent equity in Virgin Atlantic at a future date when it would go public in Nigeria, saying the condition was contained in the agreement.
Earlier, President Olusegun Obasanjo declared that the Federal Government has not and would not invest in Virgin Nigeria.
The president stated this yesterday when Branson came to brief him on the preparedness being made to establish the new airline.
Obasanjo, however, advised that the partnership with Virgin Atlantic Airways should not in any way be likened to the Nigerian Airways.
"Nobody should mistake this in any form or shape as Nigerian Airways. There must be a distinction. Government does not have a penny in it. Government has just midwifed it," he stated.
While throwing a challenge to Branson to establish an excellent airline with linkages to other Virgin Atlantic air services globally, the president added, "I want to make Nigeria the hub of air transport in West Africa and Africa."
He commended Branson for the faith he demonstrated in Nigeria by establishing Virgin Nigeria and expressed the confidence that this would attract more investors to Nigeria.
Branson assured that the airline would offer first class services that could be compared with Virgin Atlantic global standards.
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