After Several Years of Truncating Service, Lessors Set to Resume Dry Lease Offering to Nigerian Carriers

Chinedu Eze

Indications are rife that some lessors have concluded arrangements to resume dry lease offering to Nigerian carriers, following the renewed negotiations initiated by the Minister of Aviation and Aerospace Development, Mr. Festus Keyamo.

The development, which has raised the hopes of many Nigerian carriers, is coming after several years of truncating such service due to disagreement that emanated from trust issues.

Dry lease is a system whereby the aircraft owner (lessor) provides aircraft to airline operator (lessee) on long term basis of about five to 10 years, without a crew. Under the dry lease arrangement, the airline takes on the operational responsibilities of providing crew and maintenance for the operations of the leased aircraft.

Since last year, the Minister has been holding discussions with top officials of AerCap and Boeing on how the lessors would resume offering Nigerian airlines, their aircraft on dry lease after a long hiatus.

THISDAY gathered that after observing the operations of Nigeria’s largest carrier for a long time and noted the airline’s ability to promptly pay for the lease of aircraft in its fleet, the lessors decided to resume offering dry lease to Nigerian carriers, starting with Air Peace Airlines.

A source close to the airline told THISDAY that the lessors were impressed after studying the operations of Air Peace and its capacity to pay $20 million monthly for 10 leased aircraft on the Aircraft, Crew, Maintenance and Insurance (ACMI) plan, which is wet lease that comes at high cost. The lessor, THISDAY learnt, has decided to offer the airline with aircraft on long term basis.

Also, Air Peace successfully partnered Norse Airline, European based carrier on its Lagos-London route, reinforcing the airlines professionalism and safety standards.

With this positive move, there is hope that Nigerian carriers would boost their fleet to meet passenger demand in the coming months and this will bring down airfares on the domestic routes.

But it has not been all rosy for Nigerian airlines, as indicated by the spokesman of Airline Operators of Nigeria (AON), Professor Obiora Okonkwo, who recently revealed how a Tunisian airline, Sfax, took aircraft, which it leased to Air Peace, out of the country earlier in the year, when it still has the Nigerian carrier’s $2 million.

The Sfax officials lied that it wanted to carry out urgent maintenance of the aircraft and would deploy a replacement, which prompted Air Peace to allow them to take the aircraft out of Nigeria, but they never replaced the aircraft and they never returned the outstanding $2 million to Air Peace.

THISDAY learnt from a source close to the airline that the reason why Air Peace did not want to stop the airline was because of the reputation of Nigeria, noting that if it had stopped the aircraft from being flown out, reports would have it that Nigerian airline has seized aircraft leased to it, which would cause further damage to the image of Nigerian airlines and the country.

“The agreement was that if they take the aircraft away they would bring a replacement because they still have the airline’s $2 million but they did not fulfill the promise to replace the aircraft. So, they reneged on that agreement. The airline notified NCAA, which wrote to the Tunisian Civil Aviation Authority (CAA), but till today they did not return the money. Information that reached the airline then was that immediately they took the aircraft to Tunisia, another organisation took over the aircraft. Air Peace has to make that sacrifice in order to avoid damaging the image of Nigeria; otherwise, it would have insisted that the aircraft should not be taken out of the country,” the source told THISDAY.

The Minister took the decision to help the airlines last year when officials of the Boeing company, the manufacturers of Boeing air planes and officials of AerCap, the world’s biggest aircraft leasing company, led by the Chairman of Nigeria’s leading carrier, Air Peace, Dr. Allen Onyema, paid him a courtesy visit.

Boeing and Aercap expressed their willingness to offer Nigerian carriers dry lease opportunities if the country met certain conditions.

Keyamo expressed the willingness and desire of the Federal Government of Nigeria to strengthen the capacity of the indigenous Nigerian airlines to compete on the global stage. On this note, he reiterated the resolve of the federal government to guarantee the release of lessors’ assets to its owners from any defaulting Nigerian airline.

He followed through and continued to make the push and now his efforts are bearing dividends with the indication from AerCap that it would offer Air Peace aircraft on dry lease.

Keyamo had said his decision to push for lessors to offer Nigerian airlines dry lease options was in line with the plans of the federal government to boost the capacity of Nigerian airlines in order to enable them compete effectively in the international air transport market.

Biggest airlines in the world thrive on their partnership with lessors through dry leasing and other forms of financing for their aircraft acquisitions, but the Nigerian airlines are not that fortunate because lessors worldwide, for over a decade now, have unofficially blacklisted Nigerian airlines from such opportunities as the lessors claimed that the country had not helped in the recovery of aircraft from defaulting airlines in Nigeria.

For example, Norse Airlines, which had partnership with Air Peace has most of the aircraft in its fleet on lease, including 10 Boeing 787 Dreamliner. Airlines like Qatar, Turkish, Delta Air Lines and many top airlines in the world, operate on leased aircraft because it is more cost-effective than owning the aircraft, but the most profitable leasing system is dry lease.

Speaking recently in Lagos about the Cape Town Convention, which enables member states signatory to the convention to acquire movable equipment, and why Nigerian airlines have not benefited from it, the Minister disclosed that he had made moves to enable Nigerian carriers to comply with the convention so that when lessor gives them aircraft they would return them in accordance to the agreement and if the airline reneges on the agreement, the judiciary would ensure that the lessor got the aircraft back.

“The major problem with the Cape Town Convention is that we have acted in breach of the Cape Town Convention. We detain aircraft here. We use all kinds of legal orders to detain people’s aircraft and their engines here. And so when they bring them here, we can’t take them out again. I am sure you know some of them that I am talking about.  

“We should be honest enough to the world. When you take people’s aircraft, fulfill your obligations. If you can’t fulfill your obligations, give them their aircraft. Don’t spoil Nigeria for us. Under my watch, I told them we will not detain anybody’s aircraft. We will not. One or two of them tried that recently, and I said, take these aircraft out of here. And I got commendation letters from officials around the world. I said, take them out. Take these aircraft out of here. They are not fulfilling your obligations. So please, let us think of our country first when doing this. But we are in the process of drafting rules now,” the Minister said. 

With this new lifeline, it is hoped that one of the major drawbacks of Nigerian airlines, which is inability to acquire aircraft due to the stringent conditions attached to aircraft leasing, would be eliminated.