Domestic airline operators in Nigeria have continued to lament over their difficulties to find finance to carry out regular aircraft maintenance, buy spare parts and repair their aircraft, especially with the current challenges sourcing foreign exchange.
Ali Magaji, aviation finance consultant, says there are significant challenges for the industry as a whole to find finance for the new deliveries.
“Today, most of the airlines owe Asset Management Corporation of Nigeria (AMCON) substantial amount of money beyond the capacities of their balance sheets, which reveals that it is getting increasingly difficult for investors to source financing options,” Magaji says.
There is a very high interest rate regime from local commercial banks, poor credit rating to access foreign funding, over-regulated financial system impeding simple and genuine foreign currency transactions, Magaji says.
He identifies financing model for Nigeria in the aviation sector and these include targeted and effective subsidy from government, Intervention Guarantee Fund with very low interest rate and longer tenure.
“There should be reduction of multiple taxation that impedes airlines’ revenue, lighting of the airports and keeping them operational till midnight to improve asset turnover and baseline revenue, and easier access to foreign exchange from the Central Bank of Nigeria (CBN),” he says.
Airline operators in Nigeria are said to be facing more trouble, as some Nigerian airlines are unable to bring in their aircraft taken abroad for repairs and maintenance as a result of expensive maintenance bills arising from depreciation of naira.
Sources at the NCAA confirm this development, revealing that about 25 percent of existing aircraft owned by commercial airlines are on maintenance or AOG (aircraft on ground), either because they are no more airworthy or are due for maintenance.
Chimara Imediegwu, director of flight operations, First Nation, explains that one of the aircraft had just arrived the country from heavy maintenance while the other was on the queue to go for maintenance but unfortunately, the former one developed a fault, prompting the airline to call the manufacturers in for urgent maintenance.
“The challenges of sourcing forex with constantly changing CBN policies and rate of exchange, leaves us sometimes in situations where aircraft parts cannot be obtained when ordered due to banks’ inability to transfer funds based on bids and maintenance schedules programmed with external maintenance and repair organisations providers.
“The disruptions by these forex transfer issues cause are better imagined. To reduce the disruptions, operators are sometimes compelled to receive forex from the parallel market at cutthroat, even though the sums required are mostly in hundreds of dollars,” Imediegwu says.
Investigations carried out by BusinessDay show that airlines generate revenues in naira but carry out maintenance and purchase of major aircraft parts in foreign currency. So, with the depreciated naira, the airlines are paying double what they used to pay to carry out mandatory C-Check on their aircraft.
“Operational costs are stifling the country’s domestic airlines, such that they cannot afford to acquire hangars on their own,” Nogie Meggison, president, Airline Operators of Nigeria, told BusinessDay.
Further checks show that airlines pay a minimum of $500,000 to $700,000 for engine overhaul and about the same amount of money for C-Check maintenance on a Boeing 737 aircraft.
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