Challenges in Acquiring, Leasing Aircraft Threaten Aviation Industry as More Equipment are Grounded Without Replacement

Chinedu Eze

Nigeria’s aviation industry is being threatened by the fast depreciating operating equipment, occasioned by the challenges faced by Nigerian carriers in acquiring or leasing aircraft to replace old ones.

It was learnt that Nigerian carriers are finding it difficult to bring their airplanes that went for maintenance back to the country, due to foreign exchange scarcity. They are also faced with numerous challenges in acquiring or leasing aircraft due to stringent conditions given to Nigeria by lessors and aircraft manufacturers.

The development, THISDAY gathered, has continued to drive up airfares, as a result of the limited number of operating aircraft that do not meet the high demand of air travelers.

There are fears that despite the insecurity on Nigerian roads, more Nigerians would have to resort to road transport, should the airfares continue to skyrocket.

According to reliable information, many Nigerians who hitherto travel by air resorted to road transport during the last Christmas holidays due to increased price of tickets. There are fears that with the high cost of airline operations, some airlines may suspend flight service.

In January, the total number of airworthy aircraft for schedule commercial services was about 43 for all the 10 airlines operating in Nigeria.

This is far less than the number of private jets that operate in Nigeria, which the Nigeria Civil Aviation Authority (NCAA), puts at over 170. 

The Managing Director and CEO of Aero Contractors, Captain Ado Sanusi, in an exclusive interview with THISDAY explained why Nigerian airlines are finding it difficult to acquire or lease aircraft.

“There are so many factors. But the main factor is the country risk. And if you look at the country risk and you put Nigeria as one of the highest risk factors for getting airplanes, either lease or purchase, it’s because of a couple of factors that contributed to the country risk. Even if you start from the list, which is the accessibility of funds and repatriation of funds,” he revealed.

According to Sanusi, one of these factors is the inability of Nigeria to pay foreign airlines their trapped revenue in Nigeria due to the scarcity of dollars and as this unfortunate situation is unfolding it is making its rounds around the globe.

He also observed that Nigeria does not have a strong regulator, who can stand with the lessors to ensure they recover their aircraft in case of infringement in the agreement reached between the airlines and the lessors.

He recalled that in the past some Nigerian airlines used the court to stop lessors from recovering their equipment during disagreements.

“The International Air Transport Association (IATA) is crying that foreign carriers cannot repatriate their funds from Nigeria. The airlines cannot do this, they cannot do that and the lessors are hearing it. The aircraft sellers who want to sell aircraft are hearing that and those manufacturers who think you can give out aircraft to Nigerian airlines and receive the payment in installment are hearing this cry and so it makes it difficult for them to do business with you.

“Secondly, when you have a very strong regulator with no or very little political interference, when the lessor is going to repossess his aircraft, based on Cape Town Convention, NCAA is expected to play a big role. So if our regulator is not strong, the implementation of Cape Town Convention is not strong, so any judge in any court can grant a stay for lessor’s assets to be in country rusting away, it will also put the country in high risk, which Nigeria has been suffering from for a while,” Sanusi further said.

Cape Town Convention was adopted on November 16, 2001. The primary aim of the convention and the protocol is to resolve the problem of obtaining certain and opposable rights to high-value aviation assets, namely airframes, aircraft engines and helicopters which, by their nature, have no fixed location and Nigeria is signatory to the Convention.

The Aero Contractors boss also spoke on safety oversight, noting that lessors and aircraft manufacturers ought to have confidence in the regulator; that the regulator is efficiently regulating air safety in the country and this would give them the confidence that if they lease or sell aircraft to Nigerian carriers it will be safe.

“So, if an associate of a Nigerian carrier says, ‘Okay, I want to bring my airplane and I want to register it and put it under Nigeria registry’, how is the safety oversight? How do you maintain continuous airworthiness of that aircraft? And what is the resale value when he gets his aircraft back? And what is the respect international community will give to our Nigeria Civil Aviation Authority when they say that this is a Nigerian registered airplane, what is its market value? Or when you register an European or an American, Australian airplane in Nigeria, does it lose its value just by that act of registering it in Nigeria, and if it does, why? The reason is because they don’t have respect or they feel that our regulators are living up to the standards that they should live up to. So, those are the factors that contribute to Nigerian airlines not getting a very good deal in aircraft acquisition either through lease purchase or aircraft financing, ”he said.

Another factor, which Sanusi pointed out, is the fluctuation of the naira against major international currencies. He said that if it could remain stable for a long time, airlines could plan with it, even if the exchange rate is high.

“If we can have stability in the naira to dollar exchange rate, no matter the rate, so far it is stable, you can make plans. But with the current fluctuation, it is very difficult to make plans. Even to go and lease aircraft is very difficult because you would have made your projection on how you are going to sell your tickets, projecting how much you are going to make and how much you will use to convert the cost to Naira, earmarking how much you will pay the lessor at specific timeframe and if the fluctuation goes on, all those your assumptions are thrown out of the window and then you are back to the drawing board,” Sanusi added.

“These factors have made it difficult for Nigerian airlines to replace their depleting equipment and if this continues, fares will become too high for many Nigerians to pay for and airlines may find it difficult to continue to provide service, “Sanusi further said.