Re: Time to Dis-Virgin Nigeria

I have followed the Virgin Nigeria/MMA2 issue with interest and experience a mixture of amusement, surprise and disappointment both at the dispute and the coverage it has received in the media. In a piece by a Mr Bello-Barkindo in Thisday Newspaper, I am really quite shocked.

To state my position on the issue, I feel that in a dispute as this one where there is a legal basis (MOU signed by the Nigerian government) for Virgin Nigeria to hold on to its position, the government should be looking for a strategic solution rather than trying to coerce the airline into compliance. Quite simply, the Nigerian government has more to lose than the airline. In particular, the government's credibility as a respecter of agreements entered into is at stake and this extends beyond the immediate conflict. In that situation, I would try to negotiate a solution with the airline, which would probably include a pay-off and some other concessions. To deny that a move away from the MMA will affect the airport hub model is amusing because the complexity of integrating operations across the physically separate premises for passengers, the airlines and ground handling is probably exponentially more than from operating in one site. Hence, Virgin Nigeria is being asked to make a move that will potentially affect their commercial performance and quite rightly is resisting the move. The best approach in my view for the Nigerian government is to do the business impact analysis that Virgin Nigeria presumably is performing and figure out ways to make the relocation attractive to the airline.

I also own up to being a fan of economics and game theory and make assumptions that individuals (or organisations) tend to make rational choices that are in their own self or commercial interest.

In a world where cynicism about the role of the media (is it true reporting or news placement by spin doctors?) I find reporting on this issue really more emotional than factual. I haven’t read anyone present an interview with an independent aviation operations expert; financial expert and/or a credible airline industry person. By credible and independent, I assume firstly that they know what they’re speaking about. Rather, I am reading Mr Bello-Barkindo’s piece, which is a mix of excited activism; poor analysis and unsupported allegations.

I am not an expert on airport safety so cannot comment on the safety or suitability of the MM2. I have flown through there as a passenger and found it sufficiently attractive and certainly a whole lot better than the old airport (and perhaps in some respects even better than the MMA). Unless any contrary evidence is supplied, I have to assume that Virgin Nigeria would only refuse to move if it has a genuine reason to. And it is difficult to dismiss their concerns about safety for two reasons: regardless of ownership structure, the airline bears the Virgin name and so the brand owners will be extremely reluctant to jeoperdise their reputation (Nigeria’s air safety reputation over the last few years is less than inspiring). Second, the investment by Virgin in the airline – both for local and international flights is at risk if any safety issues arose from either side. As a rational investor, I would take every legitimate step to protect the airline’s safety record first before any other consideration.

The problem for the Nigerian government is that the claim about airport security is not credible. Unless it can point to security lapses caused by Virgin’s presence or even a more general security threat at the airport, how does it explain its original willingness to allow the airline operate from MMA? National security is a vague term but surely suggests that the government perceives some type of threat. Other countries deal with this threat by tightening security at the airport not kicking out airlines! My suspicion is that a claim of expanding capacity by relocating local flights would have more traction.

Taking some of the issues Mr Bello-Barkindo raised in turn:

Why would an airline want to “…bury… the beauty of MM2…”? What evidence does he have of this? And what rational reason can he supply?

He says Virgin Nigeria was given a “superfluous concession”. What does this mean? Was the right to operate flights from MMA a “concession”? If this was considered a concession, why weren’t clauses inserted in the agreement that gave the government opt outs?

In a business transaction, I am shocked that a journalist would describe the Nigerian representatives as “magnanimous”. If this is correct, then all those involved were either incompetent or worse: saboteurs. Their job was to secure the best possible deal for the country and so their brief did not allow for magnanimity.

I sense that Mr Bello-Barkindo is suggesting that by moving Virgin Nigeria to MM2, the Nigerian government is withdrawing an unfair advantage the airline currently enjoys over other local airline operators. I am inclined to agree with this because international passengers (less price sensitive and paying foreign currency) are less likely to leave MMA to catch flights on the other airlines. I think this is a legitimate concern but again, this should have been considered at the point of initial negotiation. In any case, Virgin Nigeria’s profits are shared with the Nigerian government (and other Nigerian shareholders) so it perhaps has an incentive to promote this advantage.

I think the most absurd part of Mr Bello-Barkindo’s write up is his claim that “…it feels entitled to a special treatment as an old colonial master. It also does not wish Nigeria well…” He also accuses Mr Branson of interference. For me, this is the kind of ‘cop – out’ that unenlightened individuals latch onto whenever they wish to explain away their own short comings. I expect that a journalist would rise above this and stick to facts. A problem of this claim is that given the influence the media have on public perception, it propagates the kind of unnecessary animosity that hurts Nigeria’s efforts at being an investment destination.

It is unfortunate that Mr Bello-Barkindo made racist allegations against Virgin Nigeria and I hope that he is able to support this with evidence. He says the airline applied stringent rules – presumably designed to exclude Nigerian pilots. Are those rules different from the ones applied by Virgin in other countries? I am amazed that on the issue of safety, a journalist will be so flippant. Given the incidents of the last 3 years and the low level of trust in Nigerian air travel, I suspect that most people would avoid flying in aircraft where pilots hold inferior qualifications to others. It does injustice to the families of those who have perished in Nigerian air disasters to say pilots should be allowed to fly aircraft when they have not been properly trained (just because the Nigerian aviation industry is comatose!). Hope Mr Bello-Barkindo won’t mind his tailor perform heart surgery on him given that open-heart surgery is not currently performed in Nigeria.

There are several other unsubstantiated claims made in the write up which could be criticised but I feel the point is clear – people like Mr Bello-Barkindo do not help in resolving this matter. Instead, they fail in their roles as journalist and whip up sentiments that in addition to complicating the immediate issues create problems that last long after Virgin Nigeria and the Nigerian government kiss and make up.