• Tuesday, May 28, 2024
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FG’s aircraft leasing company stalled seven years after

FG’s aircraft leasing company stalled seven years after

Seven years after the Federal Government disclosed plans to set up an aircraft leasing company in Nigeria, BusinessDay investigations show that the government has failed to provide funds for the project, thereby delaying its kick-off.

On the roadmap unveiled by Hadi Sirika, minister of aviation in 2015, are the national carrier, airport concession, aviation leasing company, aircraft maintenance organisation, aerotropolis and an improved workforce.

One year after the road map was unveiled, Nigeria partnered with Airbus, one of the largest aircraft manufacturers and leasers in the world, to facilitate the establishment of the leasing company.

Denys Gauer, the then French Ambassador to Nigeria, had in 2016 said Airbus Group would open an operational office in Nigeria.

Gauer said the decision on the office was a mark of confidence in the Federal Government’s agenda for the aviation industry.

However, industry sources have disclosed that the Federal Government’s failure to make available funds to drive the project discouraged the aircraft manufacturing firm.

“Between 2016 and now, there is no financial capacity for Nigeria to do the much it has projected in the country’s aviation plans? From the national carrier to airports development, reconstruction, refurbishing or concessions, Maintenance Repair Overhaul (MRO), aerotropolis, aircraft leasing, etc, all are too many irons in the fire at the same time,” said John Ojikutu, aviation security consultant and secretary general of the Aviation Safety Round Table Initiative.

“We barely achieved 30 percent in the last seven years; we have recently added aircraft manufacturing and a second runway for Abuja Airport, all falling into a time when the national economy is in recession,” he added.

According to him, foreign technical investors have no confidence in the structure of aviation development strategies.

He said if the government faced squarely the issue of national carrier, had developed the Arik and Aero airlines into flag carriers as continental and intercontinental airlines in partnerships with foreign technical investors and given out the federal airports for concessions within the first two, three years of this administration, Nigeria would have gone far and others like the MRO and aircraft leasing would have fallen in place.

Indigenous airlines have lamented the absence of a leasing company as they spend a lot of money leasing aircraft.

Femi Adeniji, chief executive officer of TAL Helicopters, said that Nigeria was losing about $2 billion due to the absence of an aviation leasing company for airlines in the country.

Adeniji said the high interest rate may make the business unsuitable in Nigeria, stressing that in the United States, interest rate for aircraft leasing was only 2 percent.

Over four domestic airlines have either leased or acquired aircraft from abroad in the last year, all running into billions of dollars.

For instance, Air Peace in 2021 had taken delivery of two Embraer 195-E2, out of the 30 it ordered for, while Ibom Air in 2021 received an additional CRJ900 aircraft, with another two brand new Airbus A220 aircraft on the way.

United Airlines, which commenced operations last year, deployed a fleet of four Embraer ERJ145 aircraft for operations, while another start-up airline, Green Africa Airways, said it would commence operations with two ATR 72-600 aircraft in June.

With high interest rates and foreign exchange rate, aircraft leasing outside the country has continued to erode the revenues of airlines, BusinessDay gathered.

Olumide Ohunayo, an aviation analyst, said while the aviation road map had aircraft leasing as a component, funds were only allocated to national carrier and concession, with a lot of hurdles to cross.

He said: “The leasing company was pushed aside and they needed the buy-in and negotiations on bodies and the unions. The concentration on national carrier and airport concession has affected this. Down the line, after the election, COVID-19 struck and there was no business anywhere. This also slowed down the process for the last few years and I doubt if anyone wants to discuss with an outgoing minister in nine to 10 months. This will be left to the next administration to pursue.

“The emphasis was on Airbus. Looking at the route structure in Nigeria, the leasing company should not be concentrated on one aircraft manufacturer but they should look for leasing companies that can provide different aircraft from the small aircraft to the short-haul to middle range aircraft to fit the West African market.”

Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School, told BusinessDay that to set up a leasing company, the government must first decide it wants to deliberately grow aviation and then put money down for it.

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He said: “The easier the lending and borrowing, the better it is. There was a time when you wrote a business proposal and brought 10 percent and the bank would fund you but it doesn’t happen again because people abused it.

“Our judicial system is weak. The person coming in to put money must be assured that if anything goes wrong, that he will not spend six years in the court but get instant judgement. For this to work, the Nigerian system has to work; meaning an airline operator with an Airline Operating Certificate can apply for the loan, present his proposal and get the funding he needs. Nigeria is not ready for this.

“If we had a leasing company, the benefits would be tremendous. Airlines will flourish, the cost of operating the aircraft will go down drastically, tickets will be cheaper, more people will be able to travel and the government will generate more funds and there will be chain benefits.”

Mshelia said for this to happen, the leasing company would give these aircraft to airlines with a convenient repayment plan, the banks could reduce interest rates to as low as three percent for airlines, and the leasing company would buy more aircraft.