Posted by By Jerry Uwah, Leadership (Abuja) on
Virgin Atlantic Limited (VAL), the core investor in Nigeria's troubled flag carrier, Virgin Nigeria Airlines (VNA), is set to reduce its shareholding in the Nigerian venture from 49 per cent to 7 per cent. The airline is therefore shopping for an investor to pick up 42 per cent of its shares in VNA.
Virgin Atlantic Limited (VAL), the core investor in Nigeria's troubled flag carrier, Virgin Nigeria Airlines (VNA), is set to reduce its shareholding in the Nigerian venture from 49 per cent to 7 per cent. The airline is therefore shopping for an investor to pick up 42 per cent of its shares in VNA.
LEADERSHIP SUNDAY reliably gathered that the airline is shopping for an issuing house to handle the private placement that would emanate from the divestment. It was gathered that First Bank of Nigeria (FBN) Plc and United Bank for Africa (UBA) Plc were top on the list of the financial institutions targeted by the airline for underwriting the planned share purchase.
The airline has approached First Bank to underwrite the acquisition of VAL's 42 per cent shareholding in VNA at the cost of $25 million. It was also learnt that UBA had earlier been approached with the offer, but it was not clear why the bank that holds 5.25 per cent of VNA through its subsidiaries could not snatch the offer.
The plan is that either UBA or FBN would underwrite 42 per cent of VAL's holdings in VNA, warehouse the shares and then sell them through private placement within nine months. The amount for the underwriting arrangement would be secured by executed share purchase agreement between VAL and VNA and an executed board resolution of VAL authorising the sale of 42 per cent of its holdings in VNA.
VNA's director of corporate communications, Mr. Larry Agose, who refused to confirm the story, however, told LEADERSHIP SUNDAY in a telephone interview that the airline has not decided on an issuing house for the underwriting of the divested shares.
VNA made a turnover of N20.9 billion in its operations in 2007 during which period it recorded a loss of N9.5 billion.
Airline industry operators contend that Sir Richard Branson, the chief executive of VAL, was under pressure from Singapore Airlines, a key shareholder in VAL, to dump its loss-churning venture in Nigeria. "Singapore Airlines has told Branson to choose between it (Singapore Airlines) and Virgin Nigeria Airlines," said our source who would not want his name in print.
VNA's domestic operations were grounded last week by the federal government following the airline's refusal to relocate its domestic operations to Terminal 2 of the Murtala Mohammed Airport, Ikeja, known as MMA2.
Industry operators blame VNA's huge operational losses on the fact that VAL's lease rental to VNA were too high. They also contend that VNA pays $250, 000 monthly to VAL for the use of its brand name - a sum, they said, was too high for an airline struggling with teething problems at a time many airlines were going bankrupt because of the high cost of fuel. It was also argued that the expatriate staff seconded to VNA was too expensive for the budding airline as each of them costs the airline an average of 100, 000 pounds monthly.
Besides, VNA's salary structure is said to be above industry standard in the country, while the airline's staff to aircraft ratio is too high. "The airline has too many staff members," said our source.
However, former minister of aviation and current governor of Bauchi State, Malam Isa Yuguda, who called this reporter to speak on the travails of VNA, lamented that the forced relocation of the flag carrier's domestic operations to MMA2 was a disservice to the nation's aviation industry.
The governor, as minister of aviation in 2004, was instrumental in the emergence of VNA.
He said the decision to allow the flag carrier to run its domestic operations from the international wing of MMA was premised on the fact that Lagos was to serve as a hub for airlines in Africa.
He contended that former president Olusegun Obasanjo gave him the permission as minister of aviation to sign the undertaking allowing VNA to run its domestic operations from the international wing of MMA because that was the wisest thing to do at the moment because of the synergy that the airline would derive from it.
The governor said that the decision to breach the agreement allowing VNA to run its domestic operations from the international wing of MMA has sent wrong signals to foreign investors.
"Richard Branson is a reference point. Any investor in Europe coming to do business in Nigeria would certainly ask him his experience in the country," he said, wondering what Branson would narrate to prospective investors, given government's decision to breach the agreement reached with him.