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

231234Z Dec 04

UNCLAS SECTION 01 OF 02 ABUJA 002128 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
PASS DOT FOR OIA, ALSO FAA 
 
E.O. 12958: N/A 
TAGS: EAIR EINV PREL NI
SUBJECT:  NIGERIAN CONSULTANT EXPLAINS GON THINKING ON 
VIRGIN NIGERIA AIRWAYS 
 
REF: ABUJA 002119 
 
¶1.   (SBU) Begin summary.  On December 6, Embassy Economic 
Officer and Consulate Economic Specialist met in Lagos with 
Bismarck Rewane, the financial adviser to Nigeria's Federal 
Ministry of Aviation in attracting investors for a new 
national air carrier, the planned Virgin Nigeria Airways. 
Rewane discussed the Ministry's hopes for this airline and 
the high stock Nigerian officials place in its success, as 
well as Virgin Nigeria's having become ensnared in the US-UK 
disagreement over U.S. airlines' landing rights in the 
United Kingdom.  End summary. 
 
¶2.   (SBU) On December 6, Embassy Economic Officer and 
Consulate Economic Specialist met in Lagos with Bismarck 
Rewane, the lead financial adviser to the Government of 
Nigeria (GON) in attracting investors for a new national air 
carrier, the planned Virgin Nigeria Airways.  Rewane 
discussed the GON's hopes for this airline and the high 
stock Nigerian officials place in its success.  In 
discussing the GON's determination that Virgin Nigeria 
Airways succeed, Rewane said the airline's possible failure 
-- in the context of failing to gain U.S. landing rights -- 
would be "demoralizing" to President Obasanjo and Nigeria's 
bureaucrats.  Rewane also predicted that the airline's 
failure would strengthen the hand of "anti-reformers" in 
Nigeria.  In referring to the US-UK "open skies" dispute, 
Rewane said GON bureaucrats "underestimated" this 
"particular technicality" in terms of its effect on Virgin 
Nigeria's quest for U.S. landing rights. 
 
¶3.  (SBU) Rewane expressed his hope the USG would grant 
Virgin Nigeria U.S. landing rights.  He suggested the USG 
could grant the airline "conditional approval" to operate in 
the United States and give it six months to demonstrate by 
"clear indications" it has actual Nigerian management and 
control.  Rewane explained that Virgin Nigeria's business 
model does not depend entirely on the airline obtaining U.S. 
landing rights but that doing so would aid the company.  In 
discussing the attributes of Virgin Nigeria, Rewane said the 
airline would boost economic growth in Nigeria.  He also 
asserted that Virgin Nigeria's success in West Africa would 
aid the Gulf of Guinea oil sector, strengthen the region's 
private sector, and increase regional stability. 
 
¶4.  (SBU) Rewane said Virgin Nigeria expects to have an 
initial public offering (IPO) of its stock in 2007.  The 
consultant noted that with this IPO, the Nigerian public 
could buy stock in the company, while Virgin Atlantic 
Airways through its Virgin Group could not increase its 49- 
percent stake.  Rewane added that the plan is for Virgin 
Nigeria to finish its IPO prior to Nigeria's 2007 elections 
to avoid becoming entangled in domestic politics. 
 
¶5.  (U) On December 22, Virgin Nigeria published a full-page 
notice in Nigeria's The Guardian newspaper informing the 
public that "an information memorandum on Virgin Nigeria 
will be distributed on a strictly private basis to qualified 
institutional investors in early January 2005 by Investment 
Banking and Trust Company Limited, the appointed issuing 
house.  The private placement process will be concluded 
before the end of February 2005, with Virgin Nigeria 
majority-owned by Nigerian institutional investors (51 
percent) with Virgin Atlantic Limited holding 49 percent. 
This private placement will only be open to a select number 
of qualified Nigerian institutional investors....  [Those] 
who meet the specified eligibility criteria (which have been 
consented to by the Federal Ministry of Aviation) will have 
the opportunity purchase a total of 51 percent of the issued 
share capital of Virgin Nigeria through the private 
placement.  To participate..., interested institutional 
investors will need to meet the following criteria, amongst 
others: 
 
-- be Nigerian registered institutions that have  been in 
existence for at least three years before 1 January 2004, 
with minimum total net financial assets of naira 350 
million, and must not hold any material interest in an 
airline competing with Virgin Nigeria (i.e., any airline 
registered in Nigeria by the NCAA as a Nigerian carrier and 
operating with Nigeria as its home base)." 
 
¶6.  (U) The Guardian announcement confirmed that "at a later 
point in time, Virgin Nigeria will undertake an initial 
public offer (IPO) and seek quotation on the Nigerian Stock 
Exchange.  The IPO will be open to the Nigerian investing 
public to enable interested Nigerian citizens [to] own a 
stake in the flag carrier." 
 
¶7.  (SBU) Based on his discussions with GON Minister of 
Aviation Isa Yuguda, Rewane said Yuguda's main priorities 
are, in descending order: (1) Virgin Nigeria Airways' 
successful launch and its attainment of U.S. landing rights; 
(2) the U.S. Federal Aviation Administration's Category I 
certification of Nigeria's civil-aviation sector; and (3) 
Nigeria's expansion of its tourism-sector infrastructure, to 
benefit from and support its airline industry. 
 
¶8.  (U) Begin comment: Bismarck Rewane did not understate 
the difficulties posed to the launch of Virgin Nigeria by 
the US-UK "open skies" dispute.  Nevertheless, Rewane was 
hopeful the USG would show understanding for Nigeria's 
position.  Rewane did not suggest any other foreign airline 
as a possible replacement partner for Virgin Atlantic 
Airways.  End comment. 
 
FUREY