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How states can recoup investment in airports using Delta State example

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Delta airport, Okowa
Governor Ifeanyi Okowa

 By Lawani Mikairu

Last Tuesday, the Delta State government signed a concession agreement with a consortium of private companies to manage and run the Asaba Airport for a period of 30 years.

Aside from the companies upgrading the infrastructures at the airport, the major concessionaire is to pay annual royalty to the state government until the airport is again handed back to the state.

Considering the fact that many state governments have built and invested their scarce resources in airports that are underutilized in terms of flight traffic and consequently does not bring revenue to the state, the Delta State bold step has been applauded by industry stakeholders.

The concession agreement is coming after five years of negotiations between the parties involved in the concession. The negotiation started in 2016 when the current Governor of Delta State, Dr Ifeanyi Okowa indicated his intention to concession the airport for better management.

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The Asaba Airport Company Limited, the concessionaire, is a consortium that has technical partners as sub-concessionaires.

They are Air Peace as the Anchor Airline and MRO operator, Multifreight Cargo and Logistics for the cargo and Logistics centre, Arbico Construction Company to build the Business Park, Hotel and Convention Centre, Rainoil Limited and Cybernetic Limited to develop the Tank Farm and provide aviation fuel, and Quorum Aviation Limited to develop the private jet and Helicopter Terminal of the airport.

Speaking about the agreement and how it was arrived at, the Chairman of the Delta State government Asaba International Airport Concession Committee, Mr. Chiedu Ebie, who is also the Secretary to the State government, said, “The Delta State government is delighted that after an extensive bid process, which spanned a period of five years, with two major consortia emerging in the last round of bidding process, the FIDC-Menzies Consortium was selected as the preferred bidder to operate as the Master Concessionaire”

“FIDC is an emerging and fast-growing Nigerian building, construction and civil engineering company. Menzies on the other hand is one of the biggest airport operators in the world. It operates in over 200 airports around the world, showing dominance in most major airports in the United Kingdom, United States of America, Europe and South Africa.”

The Governor of Delta State, Dr Ifeanyi Okowa while delivering his speech at the signing ceremony revealed that the Concessionaire will “ pay an annual fee of 100 million naira to the state while the agreement lasts. They will also pay an  initial sum of 1billion naira concession fees ( One Billion naira ) to the state government two weeks after the agreement is signed.”

The concessionaire is also to pay the State government 2.5% profit annually before tax. To encourage the concessionaire, the state government has given them five years tax exemption to enable them stabilize.

Explaining why the airport had to be concessioned, the Governor said that the airport which was conceived and built by former Governor of Delta,  Dr. Emmanuel Eweta Uduaghan to “ tap from the proximity of the Eastern cities of Onitsha and Nnewi and to be a hub for cargo export for agricultural and manufactured products suffered a major setback when the airport was downgraded to  category three by the Nigerian Civil Aviation Authority (NCAA) in 2015.

It was then, according to the governor, that the state government resolved to turn the airport into international “economic airport that is self-sustaining through a robust Public Private Partnership (PPP)”.

Governor Okowa said : “This administration had to undertake the reconstruction of the runway, taxi ways and other auxiliary works, completed the perimeter fencing, evacuated the hill beside the airport as demanded by the regulatory authority. Subsequently, the airport was upgraded which enables aircraft such as B737, B747, Airbus planes to land”.

“This administration completed the installation of ILS and airfield lighting system so that the airport can handle night operations. The airport has operated several night flights approved by the NCAA and NAMA. The fire fighting system has been completed while the controller tower has been modernized.

“The initial concession period is for 30 years with the following terms as approved by the Delta State Executive Council and also by the Delta State House of Assembly. The name of the airport shall remain Asaba Airport but the concessionaire can choose any other name in the name of branding. There shall not be any publicly competing airport or any other airport near the airport anywhere in Delta State during the concession period”.

“The concessionaire shall be responsible for the management, operational and maintenance of the airport, keeping the airport in good operating condition through the concession period and in accordance with best industry practice and conditions of the agreement”.

With the economic benefits the Delta State government will reap during the concession period, and the fact that the airport infrastructure will be upgraded to world standard by the private investors, aviation stakeholders are unanimous that the state government has taken a wise decision.

Many state-owned airports across the country are lying fallow with many of them hardly witnessing flight traffic in weeks except when there is a chartered flight to the airport.

The huge resources committed to the construction of these airports are, therefore, almost a waste and bad investment as the airports suffer quick deterioration from lack of usage.

Vanguard News Nigeria

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