Nigerian Airlines Blacklisted from Aircraft Leasing, AON Reveals

*Air Peace spent N60bn on overseas aircraft maintenance in 2022

Chinedu Eze

Despite being signatory to the Cape Town Convention Treaty, which enhances transactions involving movable property for member countries, lessors have blacklisted Nigerian airlines from engaging in long-term, comprehensive leasing of aircraft, known as dry lease on alleged country risk.

This was disclosed yesterday by the Chairman/CEO of Air Peace, who is also the Vice-President of Airlines Operators of Nigeria (AON), Allen Onyema.
Onyema also disclosed that his airline spent at least N60 billion in the maintenance of its fleet of aircraft in 2022 alone.

According to him, the lessors have also introduced very strict conditions, including financial exploitation for leasing aircraft to Nigerian carriers under which the aircraft leased comes with foreign cockpit, cabin crew and maintenance, known as wet lease.
In addition, he said Nigerian airlines are made to pay outrageous insurance premium on their aircraft because of the same alleged country risk by insurance companies and lessors.

Country risk refers to the assumption that aircraft that operates in Nigeria is at very high risk due to insecurity, harsh operating environment and possible failure of the airline that leased the aircraft to keep to the terms of the agreement.
Speaking on behalf of AON at the fourth day of the Federal Airports Authority of Nigeria’s (FAAN) National Aviation Conference (FNAC) with the theme, ‘Sustainability of the Aviation Industry in Nigeria,’ Onyema lamented that the aforementioned cost of aircraft maintenance and high interest rate were killing local operators and inhibiting their competitive level.

The Vice President of AON said Nigerian airlines pay at least 26 per cent as interest rates on loans obtained, while their counterparts get same loans at single digit interest rates of 2 per cent and on long term.
With this, Onyema argued that there was no way the indigenous airlines could compete effectively with their counterparts in Europe and America, warning that the huge operational costs could also lead to the death of these domestic operators.
Onyema explained that the insurance premium paid by Nigerian airlines was three times what airlines pay in other parts of the world, especially in Europe and America.

“Nigerian operators borrow money in our banks at double digits interest rates of 26 per cent while the foreign airlines that we are competing with get their own at just 2 per cent.

“Also, equipment leasing company is another major challenge we are facing in this industry. We need to pity, not just the airlines in this industry, but everybody in the industry.

“The insurance premiums Nigeria airlines pay to insure one Boeing 737 aircraft is enough to cater for three of the same equipment in any of the legacy airlines. We still have a long way to go in this industry,” he said.

Oneyma further lamented lack of adequate Maintenance, Repair and Overhaul (MRO) facilities for local airlines, saying Air Peace, for instance, expended about N60 billion maintaining its fleet in 2022.

He insisted that none of the legacy carriers could survive in the same environment as Nigeria.

In his contribution, the Chief Executive Officer (CEO) of 7Star Aircraft Maintenance Hangar, Isaac Balami frowned at the capital flight from the aviation sector, saying at least Nigerian airlines, including non-scheduled operators and Nigeria Air Force spend about $1 billion annually on maintenance of aircraft outside the country.

He explained that with the enabling environment, Nigerian engineers could perform better than their foreign counterparts and sought for more financial supports from the government for business expansion for indigenous investors.