US embassy cable - 04LAGOS125

UNCLAS LAGOS 000125 
 
SIPDIS 
 
STATE PASS DOT FOR KEVIN SAMPLE 
 
E.O. 12958: N/A 
TAGS: EAIR, ECON, NI 
SUBJECT: SAA NAMED NIGERIAN EAGLE'S TECHNICAL PARTNER 
 
REF: 03 LAGOS 2153 
 
1. (U) Summary: On Wednesday, January 14, GON officials 
announced the selection of South African Airways (SAA) 
as Nigerian Eagle Airlines' technical partner. 
Executives close to the deal expect the new airline to 
replace Nigeria's ailing national carrier, Nigeria 
Airways Limited, later this year.  End summary. 
 
2. (U) Competition for the position of technical 
partner was far from fierce: SAA was the only 
established international airline to answer the GON's 
November 17 call for expressions of interest in 
Nigeria's new flag carrier.  Even so, the airline's 
proposal was subject to a thorough evaluation. 
Executives at Financial Derivatives Company (FDC) 
Limited, the Lagos-based economic think tank acting as 
the project's financial advisors, compared SAA's 
operations to those of Lufthansa and report being 
"impressed" by SAA's technical and managerial capacity. 
They say the airline is capable not only of operating 
domestic and regional flights, but also of providing 
long-haul point-to-point services to London, Dubai, 
Saudi Arabia, and Johannesburg. 
 
3. (U) As Nigerian Eagle Airlines' technical partner, 
SAA will exercise management control and direct the 
airline's day-to-day operations.  SAA is expected to 
purchase at least 30 percent of the carrier's $60 
million total equity, although FDC executives say SAA 
would like to control a slightly larger proportion. 
The financing, they say, has not been fully agreed, but 
they expect core investors to hold 40 percent of 
Nigerian Eagle Airlines and intend to offer the 
remaining 30 percent to individual shareholders in an 
initial public offering slated for late 2004 or early 
2005 (or shortly after the new carrier posts two 
consecutive quarters of earnings).  Nigerian Eagle 
Airlines will be wholly privately owned, but as 
Nigeria's designated flag carrier, it will acquire 
landing rights at major airports and gain access to the 
routes available under the GON's existing bilateral air 
services agreements. 
 
4. (U) Comment: Having found a reliable technical 
partner, one of the only things Nigeria's new flag 
carrier lacks is a group of core investors.  Finding 
them is FDC's next step.  Nigerian Eagle Airlines seems 
to have gotten off to a good start.  If it gets off the 
ground later this year, Nigeria's aviation industry 
should receive a substantial boost - and begin to 
repair a reputation badly damaged by Nigeria Airways' 
failures.  End comment. 
 
HINSON-JONES