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.

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North American Airlines Ends Service to Nigeria
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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

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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