…as big carriers out-price Nigerian airlines in leasing market
The aircraft delivery delays from major manufacturers, Airbus and Boeing, may worsen the current plane shortages in Nigeria, stakeholders have said.
Boeing and Airbus have been struggling to meet delivery goals amid supply chain challenges. An ongoing strike at Boeing has raised concerns about worsening delays at the U.S. plane maker amid a broader crisis around its safety reputation.
In addition to this, the war in the Middle East and Ukraine has become a threat to aircraft supply as the missiles being fired have to be replaced by firms that manufacture aircraft parts.
Willie Walsh, chief executive officer, International Airlines Group, described the delay in aircraft delivery as ‘massively frustrating,’ noting that things are not yet getting better.
A number of Europe’s leading airlines have bemoaned the resulting capacity constraints at a conference in Brussels, with Ryanair saying it would have to revise down its passenger traffic estimates for next year due to the delays.
Stakeholders told BusinessDay that in Nigeria, things have been worsened by high insurance costs and dollar shortages which have made plane acquisition and maintenance far more expensive for domestic carriers.
“For Nigerian carriers, things will get worse as there are no reliefs in sight,” an operator of airline charter business, who would not want his name mentioned, told BusinessDay.
“Without deliveries from Boeing, and Airbus overstretched, big European and American carriers are now going after the limited lease option and out-pricing Nigerian carriers that typically play in the leasing market,” the operator added.
In the last few months, only few aircraft have had to feed several passengers on domestic routes as Nigerian airlines struggle with fleet reduction due to high cost of maintenance.
Airlines that have sent their aircraft on maintenance are unable to return them due to foreign exchange scarcity.
Others have been forced by the Nigeria Civil Aviation Authority (NCAA) to ground their aircraft for their inability to send aircraft for maintenance, BusinessDay’s checks show.
In addition to these, the grounding of Dana Air, a relatively low-cost carrier with six aircraft in its fleet, has also impacted the fleet operating the domestic routes.
Sources close to the NCAA told BusinessDay that apart from Dana Air that has been grounded, over half of the 91 aircraft have gone on maintenance, putting a strain on the few operating aircraft. Currently all scheduled airlines put together cannot boast of 40 operating aircraft.
John Ojikutu, industry expert and the CEO of Centurion Aviation Security and Safety Consult, said while the global aircraft supply crisis would impact Nigerian airlines’ access to aircraft, local airlines must remain within the country and consolidate on local operations to reduce their costs and cushion the effects of the current crisis.
He noted that the government should restrict each of the foreign airlines to either Lagos or Abuja, stressing that this way, the domestic airlines will not lose out much if they are not out on the international route competing with legacy carriers.
“No domestic airlines can go into competition with the foreign airlines now on the international Bilateral Air Service Agreements (BASA) routes without full government support as a national flag carrier,” he added.
A few days ago, Festus Keyamo, the minister of Aviation and Aerospace Development, announced that Nigeria had been removed from the global watch list after its global aviation rating rose to 75.5 percent.
Keyamo had hinted that with the new development, airlines could now access dry lease aircraft.
The minister assured that very soon, there would be more aircraft in Nigeria.
Read also: Aircraft shortages narrow options for passengers on second-tier routes
George Uriesi, chief operating officer of Ibom Air, told BusinessDay that the minister has tackled the core underlying issues that make access to leased aircraft difficult for Nigerian airlines.
Uriesi said the minister has also tackled the swiftness of repossession of aircraft when there’s a default and is vigorously working on insurance limitations that affect international lessors’ appetite to lease aircraft to Nigerian players.
He said the minister has also championed the issue of access to forex.
“Resolving all three key elements are necessary to pave the way for easier access to aircraft dry leases from the international lessor community,” he said.
Uriesi however noted that these critical levers alone would not yet provide dry leased aircraft to local operators, noting that they rather have just opened the door wider for discussions to happen.
“The road to successful dry leasing fleets of aircraft has some more miles to cover. And once the minister’s efforts are done, the ball will now be in local airlines’ court to actually approach and secure leasing agreements from lessors.
“This is where, as they say, the rubber will meet the tar,” Ibom Air COO told BusinessDay.
A retired captain of a Nigerian airline, who would not want his name mentioned, said the supply chain crisis by plane manufacturers means Nigerian airlines may have access to only older aircraft, not brand new aircraft .
“The global supply crisis will impact us here in Nigeria,” the retired captain said.
Read also: Calls for aircraft entry review clash with safety concerns
Olumide Ohunayo, industry analyst and director of Research at Zenith Travels, told BusinessDay that Nigerian airlines go for much older aircraft due to the cost of leasing.
“The major problem for us may not be the lack of aircraft to lease, but the ability to get enough foreign exchange to lease and continue to fund it. The rate of exchange is not improving. It’s the highest ever. It is about N1,700 to a dollar and this is the highest ever.
“Airlines are not generating revenue in dollars but in naira. Is the revenue commensurate with the rate of exchange? Do we have many people to fill the aircraft? As the rate of exchange and cost of fuel increase, so is the rate of inflation. That has affected the flying population,” Ohunayo said.
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