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Cablegate: Gon Seeks Alternatives to Saa for Nigeria Eagle

This record is a partial extract of the original cable. The full text of the original cable is not available.

081506Z Jun 04

UNCLAS LAGOS 001194

SIPDIS

E.O. 12958: N/A
TAGS: EAIR ECON NI
SUBJECT: GON SEEKS ALTERNATIVES TO SAA FOR NIGERIA EAGLE
AIRLINES


1. (U) Summary: The GON is considering new expressions of
interest from European carriers (Virgin Atlantic, Air
France/KLM and Lufthansa) to become the technical partner to
the proposed Nigerian Eagle Airlines (NEA). The GON's
introduction of new conditions for a reciprocal agreement
mandating that Nigerians be allowed to buy 10 percent equity
in South African Airways (SAA) has stalled the talks with
SAA, previously designated tentative technical partner to
the NEA. Executives involved in the talks say Virgin
Atlantic is likely to be chosen if SAA remains
uncompromising. End summary.

2. (U) The anticipated take-off of NEA, previously scheduled
for second quarter of 2004, is now stalled because of a
breakdown in talks between the GON and SAA. This was
brought about by a recent GON demand that a reciprocal
agreement permit Nigerians to buy 10 percent equity in SAA
if it should ever be privatised. This precondition to the
signing of a memorandum of understanding (MOU) reflects
earlier criticism, particularly by civil society, that the
GON had moved too quickly to select SAA as the tentative
technical partner of the new flag carrier.

3. (U) Aviation Minister Isa Yuguda announced the GON's
decision to look for alternatives to SAA as technical
partner several days ago. Alternative airlines being
considered include European carriers Virgin Atlantic, Air
France/KLM and Lufthansa, which he said had submitted bids
for the joint venture. According to Bismarck Rewane, the
Managing Director of Financial Derivatives Company (FDC)
Limited, the project's financial advisors, Virgin Atlantic
seems to be the GON's preferred bidder.

4. (U) Though SAA officials have reportedly denied a glitch
to the signing of an MOU and have asserted that negotiations
are progressing, Yuguda has merely stated that SAA can
resubmit a bid to be NEA's technical partner. He added that
SAA's willingness or refusal to meet the GON's demand for a
reciprocal agreement remains a major determinant of SAA's
future success or failure to obtain the contract if any.

5. (U) Comment: As the selection process suggests, the
choice of a technical partner may be more political than
economic, given the GON's historical ties to Europe. If
selected, Virgin Atlantic would run two daily flights on the
lucrative Lagos-London route, along with other regional and
intercontinental routes, reserved for the flag carrier.
While Rewane believes that the bid is still open, he fears
that the difficulty of his firm's getting together a group
of core investors will be compounded by the probability that
the GON will yet introduce new conditions during its
negotiations with other prospective investors, as it did
with SAA. End comment.

HINSON-JONES

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