Department of transportation washington, D. C

Communications with respect to this document should be sent to:

Dr Yemi Osindero David E. Schaffer

Head, Corporate Development David E. Schaffer Associates LLC

Funke Adeyemi 9205 Hambletonian Place

Legal Officer & Company Sec Vienna, VA 22182

Virgin Nigeria Airways Ltd (703) 938-3062

3^rd Floor 17 Ligali Ayorinde Street (703) 938-3063 (fax)

Victoria Island Dschaffer2@cox.net

Lagos Nigeria

yemi.osindero@virginnigeria.com Counsel for Virgin Nigeria Airways Ltd

adefunke.adeyemi@virginnigeria.com

Dated: December 22, 2005

NOTE: ANY PARTY MAY FILE AN ANSWER TO THIS APPLICATION. ANSWERS TO THIS APPLICATION ARE DUE TO BE FILED AT DOT ON OR BEFORE JANUARY 12, 2006.

Introduction 1

VNA-002: Greater than 5% Shareholders of Virgin Atlantic

VNA-003: Directors

VNA-004: Officers and Key Management Personnel

VNA-005: Operating Authority Issued by the Nigerian Civil Aviation Authority

VNA-006: Aircraft Fleet

VMA-007: Additional Details Concerning Leasing Arrangements

VNA-008: Financial Background

VNA-009: Traffic Forecasts

VNA-010: Designation

- i -
BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.



)

Application of )

)

Virgin Nigeria Airways Limited )

) Docket OST-2005-

For a foreign air carrier permit )

pursuant to 49 U.S.C. § 41301, et seq. )

(U.S. – Nigeria) )

)

APPLICATION OF VIRGIN NIGERIA AIRWAYS LIMITED

FOR A FOREIGN AIR CARRIER PERMIT

Introduction
Pursuant to 49 U.S.C. § 41301, et seq., 14 CFR Part 211, and 14 CFR Part 302, Subpart B of the Department’s procedural Regulations, Virgin Nigeria Airways Limited (“Virgin Nigeria”), a foreign air carrier incorporated in and with a principal place of business in Nigeria, hereby applies for a Foreign Air Carrier Permit authorizing it to engage in foreign scheduled and charter air transportation of persons, property and mail between Nigeria and the United States.

Simultaneously with this application, Virgin Nigeria is filing an application for an exemption. To the extent necessary, Virgin Nigeria hereby incorporates by reference information contained in the aforementioned application.¹

Virgin Nigeria satisfies all of the Department’s criteria for the issuance of a Foreign Air Carrier Permit. As will be shown below, approval of this Application would be consistent both with the public interest and with settled DOT policy. Before providing each item of information required by the Department, Virgin Nigeria thinks it essential to provide an overview of the company, the aviation sector in Nigeria, and the steps the Government of Nigeria has taken to ensure that its citizens, and indeed, all persons traveling to and from Nigeria, have access to safe and secure air transportation.

Background About Virgin Nigeria

Virgin Nigeria is a private airline that operates as the flag carrier of Nigeria. Virgin Nigeria was created after the demise of Nigerian Airways in 2002.

With the demise of its National state-owned carrier, and the lack of a robust aviation infrastructure within Nigeria, the Nigerian Government faced significant challenges with respect to catering to the needs of its 130 million inhabitants and burgeoning work force and the consequences of a growing economy whilst providing safe and secure transportation. This is especially important for Nigeria and other developing countries who seek greater foreign direct investment, international trade and global interaction. Aviation is also crucial to supporting Nigeria’s leading role in Africa and increasingly, globally.

Specifically direct air services between Nigeria and the United States are sorely needed. Nigeria is a strategically important oil producing ally of the United States and the lack of direct services hampers the development of trade links and the effectiveness of strategic initiatives such as the United States African Growth and Opportunity Act (AGOA).²

The Federal Government of Nigeria has recently been actively engaged in the reform of its aviation sector to:

• 
  Improve standards;
  
• 
  Encourage private sector participation; and
  
• 
  Limit the government’s role to policy formulation.
  

Significantly, the Government of Nigeria opted not to re-create another state-owned airline, but instead looked to the private sector to help address its need for a viable air transport network. Thus, the Federal Government of Nigeria went through a competitive process internationally to search for an established airline to act as Technical Partner to the nation’s new flag carrier. Under this framework, Nigerian nationals would hold a 51% stake in the new flag carrier, and the technical partner selected under the competitive process would hold the remaining 49 percent of the shares. The 51:49 equity structure of the company was designed by the Federal Government of Nigeria to ensure that the Technical Partner had a financial stake in the resulting flag carrier and would therefore remain committed to ensuring that the highest level of technical expertise was continually provided to the flag carrier.

After evaluating the competing bids and performing several months of audits and due diligence, the Federal Government of Nigeria on September 1, 2004 selected Virgin Atlantic Airways as the Technical Partner. Under this arrangement, Virgin Atlantic is a minority shareholder and technical adviser to the new flag carrier. Virgin Atlantic also assists Virgin Nigeria by performing certain flight operations pursuant to a wet lease arrangement (a Bulgarian carrier, BH Airways, also performs wet lease services for Virgin Nigeria).

While understanding that having a capable technical partner would be absolutely critical to the safety, security and success of the new airline, the Nigerian Government was also mindful of its continuing need to develop its own aviation infrastructure. To that end, the Government is continuing to upgrade its regulatory oversight and facilities. Following recent air crashes in Nigeria, the President has directed the Minister of Aviation to report directly to him, on a monthly basis, the progress being made with standardizing the aviation infrastructure in the country.

The Government has strongly encouraged adoption of policies which ensure that Nigerian staff will be trained to carry out various technical, operational and managerial roles. Thus, Virgin Nigeria has adopted a policy which calls upon it to: (i) hire solely on merit and to secure the best qualified people, and (ii) maximize the recruitment from within Nigeria, and where necessary recruit qualified Nigerians living abroad who wish to return to Nigeria. The company has for the past year searched for suitably qualified people internationally via Spencer Stuart, and in Nigeria via KPMG and Phillips Consulting.

Where roles required skills, experience and attributes that were not currently available in Nigeria or from returning expatriate Nigerians, the Company recruited high quality non-Nigerian expatriates to launch the airline and to facilitate standard international practices in aviation and business. Those positions include the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief Commercial Officer, Director of Flight Operations, Director, Engineering as well as Quality Assurance Manager.

The non-Nigerians brought in are explicitly required over their tenure to seek and where applicable, train Nigerian replacements as part of succession planning and the Human Resources department will hold each of them accountable for this as part of their annual performance review process. The Federal Government of Nigeria is very keen to see capacity building take place and will monitor the succession planning of Virgin Nigeria.

Nigeria’s new national flag carrier has been operating since June 2005, with Virgin Nigeria providing high quality air transport services to several destinations, including London, Johannesburg, Accra, Douala, Abuja and Port Harcourt.

In January 2006, Virgin Nigeria will start ab-initio pilot training of locally hired Nigerian graduates at international training centers. A maintenance facility with four-storey office facility is under construction and is expected to be completed by January 2007. This facility, which can house up to 4 Boeing 737’s will serve as an MRO facility. In addition to this, Virgin Nigeria is also initiating an apprenticeship program for Nigerian mechanics which will develop light maintenance expertise. Virgin Nigeria’s current headcount of Nigerian staff is over 400, with further Nigerian employment forecasted at over 1,000 by the end of 2006.

An Award of Authority for Virgin Nigeria
Would Be Consistent with Settled DOT Policy

The forward-thinking steps taken by the Government of Nigeria are consistent with DOT policy. DOT for many years has supported the privatization of state-owned foreign carriers. Indeed, when it adopted its International Aviation Policy back in 1995, DOT stated:

[Certain] countries are responding to the highly competitive integrated and global air transportation market, in which their airlines may not be fully prepared to compete. Most foreign airlines are only beginning to adapt to the more competitive operating environment through such mechanisms as streamlining costs and realigning their operations to achieve greater productivity and operating economies. For state-owned airlines, privatization is an important initial step as it will lead those airlines to develop cost-efficient operations and, in the longer term, to expand their markets.

. . .

Privately held airlines have better incentives to reduce costs and respond to public demand. Therefore, as we have in the past, we will be supportive of governments wishing to privatize their airlines so that their privatization efforts will be successful

The ownership structure of Virgin Nigeria is also in line with international policies and intent for the healthy development of African aviation such as “Safe Skies for Africa” and the African Transportation Initiative. The “Safe Skies for Africa” initiative states that African nations must assume ownership of the initiative:

• 
  by recognizing the importance of aviation safety and security to their economic development and
  

• 
  by marshalling the political will to turn these civil aviation goals into realities
  

The fact that Virgin Nigeria has Virgin Atlantic as its technical partner and 49% shareholder helps to ensure safety and security is maintained in Virgin Nigeria’s services. As explained more fully in paragraphs 5 and 6 below, 51% of Virgin Nigeria’s stock is owned by Nigerian citizens.

Virgin Nigeria’s Nigerian investors are the leaders of the Nigerian business community. These shareholders represent Nigeria’s top banks, financial institutions and corporate bodies. They are not passive investors but in fact meet frequently on Virgin Nigeria matters, and have their own shareholder representative in the person of Chief S. Adegbite (a well respected Nigerian businessman), who can coordinate Nigerian shareholder involvement in the company. Indeed, more than half of the Virgin Nigeria Board of Directors are Nigerian citizens, including the Board’s Chairman. More than half of its officers and key management personnel are Nigerians including its Chief Pilot, Controller, and Heads of Planning, Corporate Development, Legal, Information Technology, and Public Affairs.

Given the fact that Nigeria is currently not a Category 1 country under the FAA’s International Aviation Safety Assessment Program (IASA), until Category 1 certification is obtained, any Nigerian carrier, by definition would have to rely upon a foreign partner for operational and technical support in order to operate to the United States. The fact that the Government of Nigeria through a public tender process has selected a carrier from the United Kingdom, Virgin Atlantic, to serve as Virgin Nigeria’s technical partner, should in no way impede Virgin Nigeria’s exercise of its rights under the U.S.-Nigeria Open Skies agreement. Indeed, due to Virgin Atlantic’s involvement, Virgin Nigeria’s services will be operated pursuant to European Union JAR regulations, ensuring the highest level of safety.

As explained above, the Department should give very positive consideration to Nigeria’s effort to restructure its airline industry using private sector alternatives. Virgin Nigeria is making every effort to diminish over time its reliance upon foreign assistance, including training local staff for cabin crew and other technical positions, as well as working closely with Nigerian management trainees. Indeed, it is Virgin Nigeria’s hope to be able to fly its aircraft to the United States under its own Air Operator’s Certificate within the next few years. Virgin Nigeria is already flying Boeing 737-300 aircraft leased from General Electric Commercial Aircraft Services (GECAS) on its own Air Operator’s Certificate within Nigeria and the West and Central African regions. Simply put, DOT’s prompt certification of Virgin Nigeria will send a concrete and meaningful signal to the African aviation community that the Department is willing to accept innovative and forward- thinking restructuring schemes.

It is also significant to note that Virgin Nigeria anticipates that its Nigerian shareholding will increase over time as a result of a planned IPO on the Nigerian Stock Exchange. Enabling Virgin Nigeria to proceed toward that goal by way of a technical assistance arrangement with a more established carrier would vindicate the U.S. aviation policy toward Africa, and steadfast promotion of market principles.

1. Applicant name and address: The name of the applicant is Virgin Nigeria Airways Limited. Its registered address is 188, Awolowo Road, Ikoyi Lagos, Nigeria and its operational addresses are Murtala Mohammed International Airport, Ikeja, Lagos and Ark Towers, 3^rd Floor, 17, Ligali Ayorinde Street, Victoria Island Lagos. Virgin Nigeria is a Private Limited Liability Company. The company was registered on January 7, 2004 by the Federal Government of Nigeria with the name “Nigeria Eagle Airlines plc” as a brand new shell company to facilitate the eventual legal registration process for the flag carrier. The company’s Certificate of Incorporation number is 501975. It is based in Nigeria and organized under the laws of the Federal Republic of Nigeria, specifically the Federal Republic of Nigeria Companies and Allied Matters Act, 1990 (as amended in 2004).

2. Regulatory authority. The government air transport authority of Nigeria is the Nigerian Civil Aviation Authority (NCAA). Its address is Aviation House, P.M.B. 21029, 21038, Ikeja, Lagos, Nigeria. NCAA has oversight functions over the aviation sector, including the registration of aircraft, certification and airworthiness.

3. Authority requested. Virgin Nigeria seeks authority to conduct scheduled foreign air transportation of persons, property, and mail in accordance with the Air Transport Agreement between The Government of The United States of America and The Government of The Federal Republic of Nigeria on the following routing:

4. Points to be served. It is initially proposed that direct non-stop service be provided from Lagos to either New York or Newark, with service operated four times per week increasing to a daily service. No seasonal variation is planned for the start of operations. The point or points in the United States proposed to be served over time may include Washington D.C., Houston, Chicago, Atlanta, Miami and Los Angeles. The initial proposed service will be operated with Airbus 340 equipment with Business Class, Premium Economy and Economy class configurations. As will be described in detail below, it is proposed that this service will initially be operated pursuant to a wet lease arrangement between Virgin Nigeria and Virgin Atlantic Airways.