BusinessDay

Nigeria Air plans to take off amid fuel, forex crises

Stakeholders in the aviation sector have raised concerns on why the federal government approved the leasing of three aircraft for the national carrier, Nigeria Air, at a time when local carriers are struggling with high operating costs amid fuel and foreign exchange crises.

Apart from taxes and surcharges, airlines pay for spares, aircraft and maintenance in dollars, with the naira falling to record low of 710 per $1 at the black market last week amid the scarcity of the US currency.

The aviation fuel crisis, which began in late February and has worsened since then, is currently threatening the ability of airlines to continue operations, with the price of JetA1 rising from N200 in December 2021 to over N400 per litre in February. As at Tuesday, the price has skyrocketed to over N800 per litre in most destinations in Nigeria.

Two major domestic carriers, Dana Air and Aero Contractors, had to shut down operations over high operating costs.

It is against this background that stakeholders have raised concerns on how the national carrier would operate profitably and compete with other domestic carriers that are struggling to survive.

The federal government had last week approved the leasing of three aircraft for Nigeria Air.

The three aircraft are made by Airbus and Boeing. The government said the national carrier would begin operations with domestic routes.

Olumide Ohunayo, an aviation analyst, told BusinessDay that the Nigeria Air dream seemed more like a personal desire than a national one for Hadi Sirika, minister of aviation.

Ohunayo said the desire had continued to make the minister push the project despite all odds and obvious challenges.

He said: “What I see is that they will force this airline to start. When the government in power leaves, they will begin to wind down and throw the liability to Nigeria. I wonder why the Federal Executive Council would approve wet lease aircraft for an airline that is supposed to be independent, with five percent government ownership.

“Why would we start with a wet lease of an airbus and Boeing aircraft? This is happening at a time when airlines are struggling. We want to lease such expensive equipment. The reason for having a national carrier is to have domestic airlines on international routes. We are leasing aircraft that would not generate employment, yet the costs of operations will be so high.”

Ohunayo suggested that it is time the minister suspended the project, adding that the timing is wrong and there are no indications that the carrier would survive.

“At a time when the country is faced with an economic downturn, we may not even get genuine investors,” he added.

Sindy Foster, principal managing partner at Avaero Capital Partners, described the plan to kick off a national carrier at a time the sector is faced with challenges threatening airlines’ existence as “a disaster”.

“It is not too late to avert the disaster. Launching now will have a significant negative impact on the domestic aviation sector. Unless the intention is to totally destabilise the sector, postponement is the best option,” Foster said.

She said it is not in the best interest of the industry to set up a national carrier at a time when there is more competition for scarce aviation fuel and forex.

Read also: Explainer: How rising costs push Nigerian airlines to near collapse

Foster said: “They will probably get preferential treatment as they will be able to do bulk orders. How does that help the industry right now? They should focus on solving the problems. You don’t just launch something like this and hope for the best. The least you should do is an impact assessment to understand the implications of launching now.

“There may be some advantages, but what if the disadvantages outweigh the advantages. A sensible government would pause until such time as launching is a benefit to the industry. No one is going to be impressed if no other airline can compete for aviation fuel or foreign exchange, thereby grounding the other airlines or increasing their costs.”

The federal government plans to commence the carrier using a wet lease aircraft. This means the organisation that owns the aircraft will provide the aircraft, pilots, crew and engineers.

Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School, said he has no problem with the carrier coming on board now as there is no right time for a carrier to start.

According to Mshelia, there are benefits of having a national carrier as the government has the right to do certain things, in as much as there is justice and fairness but if the aircraft would be wet leased, it means all the jobs would be exported.

He said a government that prides itself with creation of jobs should not be taking the jobs abroad.

He said: “Secondly, the law of the Nigeria Civil Aviation Authority forbids you to start an airline with wet lease airplanes because a wet lease can only operate between two already existing operators with an Air Operating Certificate (AOC).

“The airline does not have AOC yet, so why will they be wet leasing airplanes? It is against the law and the government should not be breaking the law. If they do, what precedence are they setting? If the government would provide foreign exchange to Nigeria Air seamlessly and not do the same for other operators, this would be unfair and not right.”

He stressed that there should be a level playing ground and if other airlines are going to the black market to get dollars, government carriers must do the same.

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