Nigeria Air faces heavy setback as Ethiopian Airlines Group ‘not very optimistic’ about the deal

The executives of the Ethiopian Airlines Group are losing hope of breathing life into a sputtering deal that would see the establishment of a Nigerian national carrier in partnership with the Nigerian government.

Mesfin Tassew, CEO of Ethiopian, in an interview said he was “not very optimistic” about the deal, saying it “might not work.”

Efforts to establish Nigeria Air were kicked off under the auspices of Muhammadu Buhari, former Nigerian president, in 2018. Ethiopian Airlines was chosen as a partner for the project in September 2022 in an arrangement that would see the East African carrier hold a 49 percent stake in the proposed airline, with the Nigerian government holding the remainder under the Nigeria Sovereign Investment Authority.

However, the deal faced heavy backlash from local Nigerian carriers who feared losing market share to the Ethiopian Airlines-backed state carrier. Elections in early 2023 saw a new government take the helm in Nigeria under President Bola Tinubu, further complicating matters.

Mesfin called recent media reports of Ethiopian Airlines’ investment in the acquisition of three or more aircraft for the Nigeria Air venture “completely false.”

He spoke on the sidelines of an MoU signing ceremony last week, where Ethiopian Airlines inked an agreement to buy close to two dozen jets from Boeing in the coming years.

Mesfin said his office considers the Nigerian venture all but a “closed project” and is not entertaining options for moving it to the next stage. Ethiopian Airlines had initially prepared a five-year plan for the venture, according to the CEO.

He said Ethiopian has not incurred any significant losses as a result of the stalled project. There was only a single trial flight operation involving an Ethiopian Airlines jet painted in Nigeria Air livery during the lifespan of the partnership.

“It was just like any other flight,” said Mesfin. “We didn’t even open an office or hire anyone.”

Ethiopian Airlines initially won the bid to lead the Nigeria Air project in 2022, but backlash from Nigerian operators had threatened to spill over into the courtroom as opponents called for the project to be suspended.

However, suspension was not an option due to guarantees provided by the former Nigerian government. The former administration was supportive and there was significant progress towards attaining an operation permit, according to Mesfin.

But, the new Nigerian government has since announced it was pausing the venture to conduct further studies and accommodate complaints from other flight operators in the country.

In a press briefing held in November, 2023, the Nigerian Minister of Aviation and Aerospace Development, Festus Keyamo, disclosed the government had suspended the deal to “look at all the issues” surrounding the venture.

Chief among these issues is a five-year tax waiver granted to Ethiopian Airlines by the former Nigerian administration. It is a privilege that Keyamo fears will create a monopoly in the Nigerian aviation industry, as Ethiopian is invited to “come and compete with local airlines that are already paying taxes.”

Another thorn of contention stems from clauses in the agreement that would see senior positions in Nigeria Air granted to Ethiopian nationals.

“This is in Nigeria, and we agreed,” said Keyamo.

The Ethiopian Airlines Group owns significant stakes in a number of African carriers including Malawi Airlines, Tchadia Airlines, ASKY Airlines, and Ethiopian Mozambique Airlines (ZU).