Virgin Nigeria said on Thursday it was changing its name to Nigerian Eagle Airlines, further cutting ties with founder, Virgin Atlantic Limited. It is currently in talks with international investors to raise fresh capital.
The airline, which last month signed a technical partnership with Ethiopian Airlines, is also planning a private placement within the next six weeks, Managing Director, Dapo Olumide, told a news conference in Lagos.
British billionaire Richard Branson’s Virgin Atlantic had said it was looking to sell its 49 per cent stake in the airline, for which it paid around $25 million in 2005.
“We have an investment package underway right now and we are going to have a private placement very shortly,” Mr. Olumide said.
“We are talking to other potential investors outside this country and we are in discussions with them at the moment. In fact, the Chief Finance Officer just came back from a trip where he had discussions with another country, not another airline, to show you the interest that is at play right now,” he said.
Virgin Nigeria, in January suspended its loss-making long haul flights to Britain and South Africa, to focus on its domestic and regional operations, which faced growing competition from local rivals like Arik Air and Aero Contractors.
Industry sources said one of the airline’s main financial backers, the United Bank for Africa (UBA), had been pushing for it to restructure and reduce losses on the competitive Lagos-London and Lagos-Johannesburg routes.
An industry executive told Reuters in June that the Virgin name would disappear from Virgin Nigeria and that the newly-branded airline’s first priority would be to secure around $30 million in long-term funding.
He said the Nigerian government was keen on the company continuing as a viable national airline and in the longer term could potentially be supportive of a merger with a domestic rival such as Arik to secure its future.
Turbulent relationship
The name change closes a chapter in a somewhat stormy relationship between Virgin Atlantic, which still runs flights between the UK and Nigeria, and the Nigerian authorities.
Virgin Nigeria was launched to great fanfare in 2005, bringing a credible national carrier to Africa’s most populous nation, a country with a then appalling air safety record.
“We said at launch in 2005 that we would lay the foundations for a safe and customer-focused airline for West Africa,” Virgin Atlantic Communications Director, Paul Charles said.
“We also said we would ensure that it was run by strong Nigerian management for the Nigerian people. That transition has taken place successfully and the airline has a bright future ahead of it,” he told Reuters.
British tycoon Mr. Branson enjoyed a close relationship with then-president Olusegun Obasanjo, but after President Umaru Yar’Adua took office just over two years ago, an acrimonious row broke out over whether some of the contract details were valid.
Mr. Branson at one point accused the government of using “mafioso tactics” in its business dealings, while the presidency accused Virgin of “orchestrating negative propaganda”.
Observers say the souring of the relationship between Mr. Branson and Nigeria should serve as a cautionary tale for foreign investors in Africa’s most populous nation.
“Many companies, not just airlines, have found it tough doing business in Nigeria. There is a strong cultural difference between Nigeria and the western approach to commerce,” one airline industry executive said, asking not to be named.
“The government wants to be deeply involved in decision making and there is a massive amount of bureaucracy. Combined, these make it difficult to run an efficient and profitable business,” he said.
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