NIGERIA COMMERCIAL AVIATION UPDATE

UNCLAS SECTION 01 OF 02 LAGOS 000100 SIPDIS SENSITIVE SIPDIS STATE PASS TO FAA (AHARRIS), TRANSPORTATION TO KEVIN SAMPLE AND FAA STATE PASS TO OPIC; DAKAR PASS TO FAA (MOIRA KEANE) ROME PASS TO TSA REP JOHN HALINSKI E.O. 12958: N/A TAGS: EAIR ECON EINV NI SUBJECT: NIGERIA COMMERCIAL AVIATION UPDATE ¶1. (SBU) Summary: U.S. carrier North American Airlines announced it will cease all scheduled passenger service, leaving Delta Airlines as the sole air carrier connecting the United States and Nigeria. A dispute between local airlines and the airport authorities over use of the new domestic terminal has widened with the Federal Attorney General reportedly taking interest. While the dispute may cause some confusion in the Nigerian domestic aviation sector, it is not likely to impact ongoing efforts to achieve International Aviation Safety Assessment (IASA) Category One status. End Summary. -------------- -- North American Airlines Ends Service to Nigeria -------------- -- ¶2. (U) In a move that surprised Nigeria, North American Airlines (NAA) announced it will cease scheduled service to West Africa on May 19. The airline's local manager told Econoff that rising fuel costs were to blame. A corporate press release also noted a change in strategy. NAA was recently purchased by Global Aero Logisitics and the new owners say they want to focus on NAA's core military charter business. Until the arrival of Delta Airlines in December 2007, NAA had been the only scheduled carrier connecting the United States and Nigeria. -------------- --- Terminal Dispute Pits GON Against Local Airlines -------------- --- ¶3. (U) An ongoing dispute between two local airlines, the Federal Airports Authority of Nigeria (FAAN),and the private operator of the new domestic terminal at the Lagos International Airport, Bi-Courtney Intl, has reached a fevered pitch in recent days. The FAAN had ordered Virgin Nigeria and Arik Air to relocate their operations from the international terminal to the new domestic terminal. Virgin resisted, claiming it had an agreement with the GON that permitted it to operate from the international terminal. Virgin Nigeria also complains that its business model relies on passengers connecting internationally, but there is no way for passengers to transfer between the two terminals. (Note: The terminals are on opposite sides of the airport with no shuttle bus or other connection between them. End Note.) Both airlines contend that the aircraft parking ramp at the new terminal is too small and does not meet International Air Transportation Association (IATA) standards. As a consequence, the airlines say they are having difficulties in obtaining insurance for aircraft using that terminal. The FAAN denies the safety allegations and says the IATA has never performed an inspection of the airport. Bi-Courtney, owned by a well-known and well-connected local lawyer and businessman, says the airlines are stalling to avoid paying fees. ¶4. (U) In recent days the dispute has widened, with the Federal Attorney General reportedly getting involved. According to press reports and Post contacts, Bi-Courtney is increasingly concerned about low utilization rates at its terminal. On February 18, Arik Air moved from the international terminal to the old domestic terminal, a small ramshackle building that had been given over to general aviation operations after the new domestic terminal opened in September 2007. Bi-Courtney complained that Arik was avoiding the new terminal and argued Arik should be forced to use (and of course pay for) their facilities, citing a non-compete agreement Bi-Courtney signed with the FAAN prohibiting construction of another domestic terminal in Lagos for thirty-six years. The FAAN countered the old domestic terminal was excluded from that agreement and the FAAN was free to assign airlines there if it choose to do so. (Note: Virgin may have long-term plans to open it own terminal at Lagos airport. It isn't clear why Arik moved to the old terminal. End Note.) The Attorney General reportedly wants to give Bi-Courtney control of the old domestic terminal or force Arik to move once again, this time to the new domestic terminal. ¶5. (U) Virgin Nigeria received a temporary injunction barring LAGOS 00000100 002 OF 002 the FAAN from enforcing the decree, but the court later voided that injunction, saying Virgin had to use the alternative dispute resolution mechanism outlined in an agreement it signed with the GON prior to starting operations. Virgin Nigeria has been the most vocal of the two airlines in opposition to the forced relocation, and it and the FAAN have taken out ads in local papers attacking each other's positions. For its part, Arik threatened to cease operations in Nigeria and move its headquarters to Ghana or Cameroon. ¶6. (SBU) Comment: As a local newspaper noted, this controversy is likely the result of double dealing done under the previous Presidential administration. Virgin and Arik probably do have agreements that allow them to operate out of the international wing and Bi-Courtney probably does have an agreement that says all domestic flights from Lagos must use its terminal. Unfortunately for the new administration, these conflicting agreements collided on their watch. One positive development was the initial instinct of both sides to use the court system to resolve the matter. However, a political solution will probably be necessary. This issue should not distract the Nigerian Civil Aviation Authority from its efforts to achieve FAA IASA Category One status nor do we anticipate it will negatively impact FAA assistance efforts. End Comment. BLAIR