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BusinessDay
Nigeria's leading finance and market intelligence news report.

Ibom Air to spend N138bn on 10 new A220 planes

At the cost of about N138 billion, Ibom Air, indigenous airline of Akwa Ibom State, on Monday placed an order for 10 A220 aircraft with Airbus, at the ongoing Dubai Air show, taking place in Dubai.

Working in collaboration with the Airbus team, Ibom Air took an innovative approach to making the choice of the A220. With the purchase agreement signed, deliveries of the aircraft to Ibom Air will commence in the first quarter of 2023.

Airbus last published its list prices in 2018, where a brand new A220-300 was listed with a cost of $91.5 million. In 2019, the European firm made a call to discontinue list prices as airlines rarely end up paying them.

Air Austria’s three shiny new A220s were listed in August 2021 with a market value of $38.07 million, 41.6 percent of the 2018 list price for the aircraft.

The current market value for each is $33.5 million, 41.4 percent of the 2018 list price.

This implies that Nigeria’s Ibom Air may be purchasing these aircraft at the cost of $33.5 million or slightly lower. This also implies that the airline may have plans to pay a sum of $335 million for 10 of these aircraft.

Using the central bank exchange rate of N410 to a dollar, the airline may be paying a sum of N137.6 billion.

Read Also: Nigeria’s Ibom Air nears order for 10 Airbus A220 jets – Reuters

George Uriesi, the airline’s chief operating officer, spoke with BusinessDay on its finance plans for the newly ordered aircraft.

According to Uriesi, the simplest way to explain the aircraft acquisition financing is to say that commercial aircraft are high value mobile assets, usually financed long-term as they cannot be financed with cash.

“The trick to securing financing is in being able to utilise the aircraft optimally enough to pay for them. The more optimally an airline can utilise their aircraft, the easier it is to pay for the financing and make an operating profit on the asset.

“So, once an airline can demonstrate that it has the ability to utilise aircraft optimally (and safely), and demonstrate this via its operating and financial records, financiers will line up behind your aircraft acquisition transactions,” he explained.

It is not a ‘hire purchase’ type of thing like with cars as financiers finance based on their confidence that operators know what to do with the aircraft, while airlines strive to operate aircraft optimally, pay the financiers and make a profit, he said.

Ibom Air started by wet-leasing two A220s for a year, to test the suitability of the aircraft for their needs. Within six months of this process, the airline was able to validate the A220 as the right choice for its domestic and regional aspirations.

The order of the 10 Airbus A220 is said to be in line with the airline’s aggressive growth plan, which will see it expanding its footprint into new domestic routes as well as regional routes covering West and Central Africa in the immediate future.

The first phase of this expansion is set to cover cities like Malabo, Douala, Libreville, Kinshasa, Accra, Abidjan, Freetown, Banjul and Dakar. Ultimately, the airline intends to operate throughout the continent of Africa.

The all-new A220 is purpose built for efficiency, targeting the 100-150 seat market. It burns 20 percent lower fuel per seat compared with previous generation aircraft, and flies to a range of up to 3,400 nm (6,297km), offering performance similar to larger, single-aisle aircraft.

The A220s combination of a superior cabin product and low operating costs are a perfect fit for the airline’s network growth strategy and will help Ibom Air offer its customers an unrivalled value proposition.

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