Washington DC-based Fairfax Africa Fund LLC has successfully secured $250 million in equity financing for the proposed Nigeria Air, a new airline venture backed by Africa's largest airline, Ethiopian Airlines. Zemedeneh Negatu, the global chairman of Fairfax Africa Fund LLC, revealed that the firm is also considering an additional $50 million investment from two large institutional investors.
The Nigeria Air project is a collaboration between Ethiopian Airlines Group, institutional investors, and the Nigerian government. The promoters have ambitious plans to commence operations as early as October this year, starting with 15 domestic routes and later expanding to West African cities, along with international destinations like London, New York, and Shanghai.
Mesfin Tasew, the chief executive officer of Ethiopian Airlines, stated in an interview with Bloomberg TV that Nigeria Air will launch with two wide-bodied planes and six narrow-bodied aircraft. For Ethiopian Airlines, this venture will provide a significant foothold in Africa's most populous country, where approximately 23 domestic airlines are vying for influence. Past government attempts to establish a national carrier have been unsuccessful.
Under the ownership structure, the Nigerian government will hold a 5% stake in Nigeria Air, while Ethiopian Airlines will control a 49% stake. The remaining shares will be held by Nigerian institutional investors, including MRS Oil Nigeria Plc, two aviation sector companies, and a major financial institution, among others. Notably, the Nigerian government will not pay cash for its stake.
The Nigerian aviation market has been challenging for carriers, grappling with issues like limited access to foreign exchange, high aviation fuel costs, and multiple taxation regimes. Presently, only Air Peace, the nation's largest carrier, operates overseas flights.
Operating an airline in Nigeria comes with significant hurdles, as demonstrated by the defunct Nigeria Airways, which ceased operations in 2003 and was subsequently liquidated. A partnership between Nigeria and Virgin Atlantic Airways Ltd. to launch an airline in 2004 also collapsed due to disagreements.
Despite facing resistance and legal challenges from local rivals, Ethiopian Airlines won the bid to launch Nigeria Air in September 2022. To facilitate the venture, Ethiopian Airlines will leverage its extensive operational experience and fleet to assist Nigeria Air in securing leased planes at more affordable rates. Additionally, Ethiopian Airlines will provide $400 million in guarantees to lessors for aircraft acquisition on behalf of Nigeria Air.
Operating an airline in Nigeria may present formidable challenges, but Ethiopian Airlines remains optimistic. The airline believes that with its expertise and knowledge of Nigeria's business culture, it can successfully manage and develop Nigeria Air, contributing to the country's aviation sector's growth.
