• Monday, April 15, 2024
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BusinessDay

Aircraft lessors put Nigerian airlines on blacklist over past breach of contracts

Air fares to rise further as foreign airlines FX rate hit N634/$

…As FG moves to ease lease arrangements

Aircraft leasing companies across the world have put Nigerian carriers on blacklist as a result of breach in contracts that occurred in the past.

The development has since impacted the operations of local carriers and made it difficult for them to compete favourably with foreign airlines on international routes.

Read also: FG to reciprocate any treatment meted on Air Peace on London route

This was disclosed by Festus Keyamo, the minister of Aviation and Aerospace Development, in an interview during the Air Peace Lagos-London inaugural flight ceremony at the Murtala Muhammed International, Airport, Lagos on Friday.

BusinessDay Sunday findings show that Nigerian airlines are only able to secure wet leased aircraft and not dry lease aircraft contracts which are more profitable for the airlines.

In a dry lease aircraft arrangement, the owner provides the aircraft to the lessee without a crew. Neither party is required to have an air carrier certificate so long as the aircraft does not carry people or property for compensation or hire. The lessee typically exercises operational control, including, legal responsibility of the aircraft under this lease type.

But under a wet leasing arrangement, the owner supplies the aircraft as well as crew members. The owner assumes operational responsibility, which includes performing maintenance, procuring insurance, and other legal responsibilities of operations. This then means, most profits realised from the aircraft operations goes to the lessor and not the airline.

According to Keyamo, local operators are handicapped because they don’t have access to aircraft that international airlines have on the same terms.

“There is no airline in the world that buy their fleet 100 percent. It is not possible. Statistics says that out of a 100 aircraft flying around the world, about 70 percent of those aircraft are on dry lease from leasing companies and from aircraft manufacturers. So, why can’t we take advantage of these lease arrangements to empower our local operators?

“This is the key to also servicing these international routes because you cannot compete with someone who has access to aircraft on better terms than you do who will go for wet lease aircraft. The wet lease arrangements are very expensive. What we are trying to do is to ensure we support our local operators to have access to these lease arrangements like what Air Peace is doing today and that is what we can start to use to crash prices on international routes,” the Aviation minister said.

He said, “Nigeria is on the black list to get dry lease aircraft around the world. This is the diplomatic visits I have been undertaking since I came. I have been trying to assure aircraft manufacturers such as Airbus and aircraft leasing companies that we can protect their assets if they bring them into Nigeria because what they want is the assurance from government that when these assets are brought into Nigeria, we can allow them take their assets away if there are breaches to these agreements,” he explained.

He said the problem lessors faced in the past was that when they bring in their assets into the country and there is a breach of contract, court injunctions and politics, make it difficult for them to take their aircraft back, which amounts to huge loss for the lessors.

“So, what they want is that if they bring their aircraft into the country on dry lease, they can take them out when there is a breech. It is government that will assure these leasing companies and creditors to bring in their aircraft.

“I have been engaged with the diplomatic shuttle. Beyond that, we also need to comply with the Cape Town convention so as to also enable local carriers have access to dry lease aircraft,” he said.

Obiora Okonkwo, chief executive officer, United Nigeria Airlines, said that airlines are happy that the minister has agreed that there is a problem in aircraft leasing and access to equipment.

Okonkwo said the policy that needs to be addressed, adding that it is the business of the operators to go and source the aircraft but there are areas in terms of policy that needs to be addressed.

“I do not see the reason why modern-day operators should suffer the sins of the old-time operator because any lessor will tell you that there have been some violations in the past. Today we are not violating any lease arrangements but we are rather victims.

“Also, there must be a window for foreign exchange because when you lease an aircraft, there are specific days of the month you must be able to pay what has been accrued. But if you are left alone as an airline to be looking for foreign exchange in the open market like any other importer, you probably will miss the deadline. So, if we sign our lease agreements, let us submit it to CBN and the banks and let them guarantee us,” he explained.