10 Major Highlights from FG’s 80-Year Airport Concession Deal With Aero Alliance Consortium

• The much-talked-about airport concessions are about to be concluded, and key provisions have been made public
• The 80-year deal for the Akanu Ibiam International Airport, Enugu contained in a 64-page agreement
• The agreement details key provisions about how airport staff would be handled, and how revenue will be shared among the parties

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

The federal government’s 80-year concession deal with Aero Alliance Consortium is nearing completion.

This deal will hand over the Akanu Ibiam International Airport (AIIA), Enugu, to the concessionaire for the next eight decades under a Public-Private Partnership (PPP) agreement.

The draft contract covers all the details of the arrangement as it touches on airport upgrades, revenue-sharing and the handling of the Federal Airports Authority of Nigeria (FAAN) staff.

The 64-page agreement, seen by Daily SUN, details guidelines for the 80-year long arrangement and here are some highlights.

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1. The concession will last for an initial period of 80 years starting from the effective date, and may be extended by up to 20 years based on performance.
2. It can also be terminated before the end of the 80-year duration if issues arise around non-compliance. Clauses 18 says that if the termination is a result of the grantor’s default, the grantor must pay outstanding loans, third-party liabilities, equity investment, and projected returns.
3. Compliance will be monitored by a 5-member team made up of three representatives from the grantor and two from the concessionaire. In the event of a deadlock decision, ICRC will step in and enforce a binding resolution within five business days.
4. All of the airport staff under the umbrella of FAAN will be transferred to the concessionaire, along with their full benefits for an initial 24 months. In the event of a restructuring, staff that are considered redundant to the airport will be reabsorbed by the federal government, alongside with the responsibility for their pensions and gratuities.
5. According to the draft agreement, the Infrastructure Concession Regulatory Commission (ICRC) is entitled to 1% of the net income from all revenue generated from the airport.
6. Aero Alliance is required to submit aeronautical tariffs, such as landing fees and passenger service charge to the government for approval.
7. Aero Alliance will have full control over non-aeronautical revenues like cargo fees, rental, VIP lounge fees, parking, and ground handling, and while required to keep to legal limit, the concessionaire is not required to submit it for approval.
8. The concessionaire is also expected to use collected tariffs to fund operations, maintenance, debt repayment, statutory taxes, capital investments among others.
9. Clauses 14.7 and 15 also mandates the concessionaire (Aero Alliance Consortium) to prepare and submit quarterly financial reports to the grantor (federal government) for audit of its revenues and expenses. The report must contain maintenance logs, upgrade progress based on KPIs, operations, and finances.
10. Clause 16.7 contains the cost-sharing formula in the event of a force majeure event. If it is a non-political event like natural disasters, each party bears its own costs, but if it is an indirect political event like strike or civil unrest, the concessionaire covers costs up to insurance claims, while the remaining costs would be split evenly with the grantor. In the case where political events like expropriation, discriminatory laws, brings the grantor fully reimburses the concessionaire.

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The agreement clause 2.2 mandates Aero Alliance to carry out upgrades and improvements on the airport facilities, including terminal expansion, installation of updated navigation/ communication technology to address existing deficiencies.

The document also specifies upgrades for the baggage handling system, VIP lounges and others, including preventive maintenance. It also provides that all such upgrades comply with ICAO standards.

Conditions for the concession

The concession becomes effective when both parties sign it after fulfilling the conditions.

The agreement also has to be approved by the Federal Executive Council (FEC), and ratified with a Certificate of Compliance issued by the ICRC.

The concessionaire must show proof of financing, and all conditions must be met within 180 -270 days of signing the agreement, or the deal may be terminated.

Airport staff protest concession deal

In related news, aviation unions have raised alarms over the federal government's multiple airport concession projects.

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The unions said they were left in the dark and have pointed out suspicious terms in the agreement.

Legit.ng reported that the government earlier cancelled the airport concession programmes started under President Muhammadu Buhari and initiated its own plans.

Source: Legit.ng