US embassy cable - 04ABUJA1670

UNCLAS SECTION 01 OF 02 ABUJA 001670 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
DOT FOR OIA, ALSO FAA 
 
E.O. 12958: N/A 
TAGS: EAIR, EINV, PREL, NI 
SUBJECT: AVIATION MINISTER MAKES PITCH IN BEHALF OF 
VIRGIN NIGERIA AIRWAYS 
 
REF:  (A) ABUJA 1558, (B) LAGOS 1905 
 
1. (SBU) Summary.  Aviation Minister Yuguda pleaded 
with Econ Counselor September 27 for the USG not to 
put up obstacles to Virgin Nigeria's plans to serve 
U.S. cities under the US-Nigeria open skies agreement. 
Yuguda said Obasanjo would be "devastated" were the 
USG to do so.  Econ Counselor repeated the substance 
of a demarche two weeks earlier; that is, that the GON 
should reconsider the matter, adding that the GON 
should take account of the state of the airline 
industry in the United States and of our aviation 
relationship with the United Kingdom in its 
deliberations.  Yuguda offered to accept an invitation 
to go Washington to make his case.  He referred to our 
designation of Continental Airlines and suggested, 
seemingly half in jest, that the GON would act on our 
designation in the light of action the USG might take 
with respect to Virgin Nigeria Airways.  End summary. 
 
2. (SBU)  In an hour long meeting to which Embassy 
Econ Counselor was invited by Minister of Aviation Isa 
Yuguda on September 27, the Minister made a last pitch 
to convey to us his Government's case with respect to 
the imminent announcement of the establishment of 
Virgin Nigeria Airways.  Yuguda explained that the 
Government of Nigeria and the United Kingdom's Virgin 
Atlantic Airways are close to finalizing an agreement 
creating Virgin Nigeria Airlines under which Nigerian 
investors will hold a 51-percent stake, and that 
Virgin Atlantic through its Virgin Group will hold the 
remainder. 
 
3. (SBU) Yuguda was well briefed on the meeting and 
demarche we had made to the Ministry's Permanent 
Secretary two weeks earlier (ref A). We had then told 
 
SIPDIS 
the PermSec that any application to DOT by Virgin 
Nigeria for the necessary authorizations to serve U.S. 
cities will encounter severe difficulties on the 
grounds that UK interests should not be allowed to 
benefit under the US-Nigeria Open Skies agreement 
while the US-UK market remains restricted.  Throughout 
the hour-long discussion September 27, Yuguda 
repeatedly expressed his hope that the United States 
will not permit its dispute with the United Kingdom to 
block the yet-to-be-formalized Virgin Nigeria Airlines 
from landing in the United States.  He professed not 
to understand why the dispute between the USG and the 
United Kingdom should be extended to include Nigeria. 
 
4. (SBU)  Yuguda, who did much of the talking, also 
gave several reasons why the USG should not oppose the 
new airline, including job creation in Nigeria and 
helping Africa to have an internationally competitive 
airline.  Yuguda said the USG has long been 
recommending that Nigeria open its markets, and Virgin 
Nigeria is a step in that direction. Since the USG has 
often said it wants to help develop Nigeria, the USG 
should welcome the joint venture with Virgin Atlantic 
since it might make it possible for Nigeria to capture 
as much as $1.5 billion of the $3.0 billion in annual 
revenues generated by the air transport industry in 
Nigeria, resources that clearly would benefit Nigeria. 
Moreover, the United States and Nigeria have excellent 
relations.  Nigerians therefore would not understand 
why its "powerful friend" would sabotage the deal 
between Virgin Atlantic and the Government of Nigeria 
were that to come about.  Moreover, President 
Obasanjo, who is personally engaged in the matter, 
would be "devastated" if the venture were to fail 
because of U.S. opposition to it. 
 
5. (SBU)  Econ Counselor repeated the USG position as 
documented in the pro memoria he had left with the 
PermSec.  He also said the sad state of the airline 
industry in the United States is a circumstance to be 
taken account of in calculations of what may or may 
not be inimical to U.S. aviation policy or interests. 
Yuguda repeated that Virgin Nigeria is a Nigerian- 
registered airline.  As such, it can be designated by 
the Government of Nigeria to serve U.S. cities under 
the open skies agreement.  The airline is being called 
Virgin Nigeria Airways only for the purposes of using 
the Virgin brand name.  At some point, Virgin 
shareholders will cede some of their 49 percent equity 
in the venture.  "This is a purely Nigerian company," 
he concluded. 
 
6. (SBU) According to Yuguda, Nigeria does not want 
this disagreement to rise to the presidential level. 
Economic Counselor concurred, recommending that our 
political concerns be taken account before the GON 
proceeds further.  He added he would convey the 
Minister's concerns to the Department.  Yuguda then 
said he his willing to go to Washington to explain the 
Nigerian Government's position. Yuguda concluded by 
requesting that the Embassy state clearly in a letter 
the USG's views on this issue to which he promised a 
reply.  Economic counselor agreed to provide such a 
letter September 28.  (The letter is essentially the 
pro memoria of two weeks ago reformatted.) 
 
7. (SBU) Comment.  We don't know the equities behind 
the Minister's commitment to finalizing the deal with 
Virgin Atlantic. He is aware that we have designated 
Continental to fly between Lagos and U.S. cities and 
disclosed having met with Continental's Vice President 
for Network William Brunger a week ago in Abuja. 
Yuguda was also aware of the meeting in New York last 
week between Obasanjo and a Continental executive. 
Half in jest, but indicating a thought establishing 
linkage, Yuguda said that if the USG were to prevent 
Virgin Nigeria from serving U.S. cities, the GON could 
well prevent Continental from operating in Nigeria. 
Having said this, Yuguda immediately added that 
Nigeria, as a friend, of course wouldn't do this. 
 
CAMPBELL