Domestic airlines operating in the country have continued to explore alternative ways to stay afloat in the midst of economic squeeze and harsh business environment.
Aero Contractors last week Monday announced its N200 million investment in automation of Maintenance Repair Overhaul (MRO) to help increase its MRO patronage from both local and foreign carriers.
Ado Sanusi, managing director, Aero Contractors, said the airline entered into partnership with RAMCO, a software company based in Chennai, India, to provide improved digital solutions on the airline’s MRO services. He said the partnership is expected to be expanded to include the AOC RW operations in the near future.
As part of strategies to stay afloat, domestic airlines are also leasing out their aircraft and parts to competing airlines while some are investing in wet-lease arrangement, where the lessors provide their crew to run an aircraft operated by domestic airline.
“The airlines are now facing the reality of the business of aviation. They were not facing the reality before. They didn’t know the commitment involved in setting up an airline. The only option that is available for them now is to wet-lease aircraft,” said John Ojikutu, member of Aviation Round Table (ART) and chief executive of Centurion Securities.
The aviation sector has failed to attract meaningful airline investors in the last five years. Rather, the number of operating airlines has continued to dwindle, BusinessDay’s checks show.
Between 2015 and now, about five airlines operating scheduled flights have closed shop. These include Discovery Air, First Nation Airways and, more recently, Medview Airline, IRS Airlines and Associated Aviation.
Ojikutu said government has been bailing the airlines out for more than 20 years but now that the government has stopped because it no longer has money, the airlines have to seek alternative means to survive.
The airlines have had difficulty leasing aircraft from Europe, America and other continents for about two years as a result of unofficial ‘blacklist’ over funding issues, low capital and infrastructural challenge.
While lessors from other countries have not officially announced the blacklist of Nigerian carriers, BusinessDay’s findings show that stringent requirements and conditions imposed on them have made it difficult for an average domestic carrier to obtain an aircraft through leasing.
Last year, Nigeria’s largest carrier, Air Peace, was unable to acquire 10 aircraft through leasing as a result of the unofficial ‘blacklist’.
“There is an unofficial blacklist of Nigeria airlines. I can tell you for sure, it exists. We lost about 10 aircraft we wanted to acquire through leasing,” Allen Onyema, chairman and chief executive officer of Air Peace, said. “You cannot survive in this business without leasing; even all these big airlines we know in the world, majority of their planes are leased or financed.”
To survive this ‘blacklist’, airlines are now engaging in wet-lease, a leasing arrangement whereby one airline (the lessor) provides an aircraft, complete crew, maintenance and insurance (ACMI) to another airline or other type of business acting as a broker of air travel (the lessee), which pays by hours operated.
Last year, Arik Air entered into a wet-lease agreement with a Tunisian airline. The crew was provided by a Tunisian lessor, Banji Ola, Arik Air communication manager, told BusinessDay, although he said he does not know the nationality of the crew. He said the wet-lease would last six months in the first stage and the aircraft operates into Abuja and Port Harcourt daily.
In 2018, Medview Airlines wet-leased B737NextGen aircraft. Air Peace also leased a B737.800 airplane from Euro Atlantic on a wet-lease agreement. More recently, Azman leased wide-body A340-600 airplane from airline giant, Etihad.
Aero Contractors is looking at airlines that are undergoing restructuring so it can lease their aircraft and utilise them rather than allowing the aircraft to deteriorate where they are parked, its managing director, Sanusi, told BusinessDay.
“We have leased one aircraft from Med-View and we will work with him. We have leased engines from Chachangi, whose aircraft is on ground. We are also introducing other things that have not been seen in the aviation industry in Nigeria but it is what is obtainable outside the country. We now have five airplanes flying and hopefully, we are going to increase it to six,” Sanusi said.
Sam Adurogboye, general manager, public affairs, Nigeria Civil Aviation Authority (NCAA), said the regulator does not frown at domestic airlines securing operating leases which is a temporary arrangement to take care of some situations.
He said the NCAA was aware of the wet-lease agreement between Value Jets and Arik Air, affirming that it was an operational agreement to assist the airline.
“While the short-term agreement lasts, the aircraft provider takes care of the crew, aircraft maintenance, insurance, and other issues. The airline, in this case Arik Air, pays for fuelling, catering and airport and other aeronautical charges,” Adurogboye said.
IFEOMA OKEKE
