Airlines turn to local repair firms on FX scarcity

Airlines are beginning to look inwardly for aircraft maintenance as Nigeria’s foreign exchange scarcity makes overseas repairs nearly impossible.

“Since the unification of the foreign exchange, we have seen more airlines use our facility to carry out C-checks on their aircraft. Before the unification of exchange rates, airline operators were not coming to us because they used to get dollars from the Central Bank of Nigeria through the FX windows,” said Ado Sanusi, managing director/CEO, Aero Contractors of Nigeria Limited, and Aero MRO, one of the biggest maintenance facilities in Nigeria.

Sanusi told BusinessDay that the company has had its maintenance hangars full and has been forced to use Air Force hangars to accommodate aircraft awaiting maintenance.

Before the unification of the exchange rate, airlines had leveraged FX windows provided by the Central Bank of Nigeria (CBN) to source dollars at favourable rates to carry out their maintenance and run other expenses.

But with the unification of the exchange rate, the advantages that come with the windows have been eroded, forcing airlines to patronise local Maintenance, Repair and Overhaul (MRO) facilities.

Some of the local maintenance facilities include: 7 Star Global Hangar Limited, ExecuJet Aviation Group AG, Sky Jet Aviation Services, Aero MRO, Arik Air Limited, and JetMS (Avia Solutions Group).

Airlines had argued that local facilities lacked capacity to do comprehensive heavy maintenance (C-checks and D-checks) for all commercial aircraft in Nigeria.

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But with the scarcity of foreign exchange and shortage of fleet across the country, the situation has changed.

“C-checks are classified into 1C, 2C, 4C and 6C. When you open up the aircraft, you could see corrosion or cracks in the airplane. Airplanes are like balloons, and when you inflate them, you get to see more than you budgeted for.

“What we do when airplanes are brought to us is that we give operators a price for routine checks. But when we open the aircraft and find corrosion or more cracks, it could cost the airline more than they budgeted for routine checks,” the Aero MD explained.

According to him, the cost for routine 1 C-check on Boeing 737 is between $180,000 to $250, 000. A 2 C-check on the same aircraft could cost between $250, 000 to $300, 000, while a 4 C-checks cost between $500,000 to $600,000.

He further explained that non-routine aircraft maintenance can cost as high as $1 million, noting that these costs are manpower rates and not rates for spare parts.

“In Nigeria, the manpower rates are lower. For airlines to carry out checks outside the country, they have to pay for fuel to ferry the aircraft, navigational charges, crew and accommodation for representatives in the country.

“We have the capacity and the certification to carry out checks on Boeing 737s, Dash 8, Q400 and Bombardier,” Sanusi noted.

Data obtained by BusinessDay from Nigeria Civil Aviation Authority (NCAA) shows that 13 domestic airlines operate a total of 91 aircraft. This data includes aircraft that have gone on maintenance.

A breakdown of the aircraft types include: 34 Boeing 737s, one Dash 8 -300, five Embraer 195, eight Embraer 145, one Dornier 328, three Boeing 777, four Bombardier Q400, one Airbus A340, four MDs 82 & 83, three ATR 72, five CRJ 900, one Airbus A220 and two Boeing 747 aircraft types.

When the naira-dollar exchange rate was N400/$, airlines paid between N200 million and N400 million to carry out routine C-check on a Boeing 737. But with the current exchange rate of over N1500/$, airlines have to pay between N794 million to N1.5bn to carry out C-check on a single aircraft.

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“As I speak to you, we are overwhelmed. Right now, we have four aircraft on the jack, which is the space the two hangars can take. We have several other aircraft on queue awaiting maintenance. We are even using a third hanger belonging to someone else in Abuja to do heavy maintenance right now in Abuja as approved by the Nigeria Civil Aviation Authority NCAA,” Isaac Balami, founder and chief executive officer of 7 Star Global Hangar, a major maintenance facility in Nigeria, told BusinessDay.

“It is a $1 billion industry. Every year, what maintenance facilities spend to fix aircraft from Nigeria overseas is over $1 billion. These are aircraft from the presidential air fleet, the police air wing, private jet operators and commercial airlines.

“Aside USA and China, the third country in the world with the highest number of private jet owners is Nigeria. So, there are so many opportunities. We are currently struggling to see how we can meet up. We have secured land from the Federal Airports Authority of Nigeria (FAAN). We have finished the design and our partners from Europe will be coming to build the hangar for us,” the 7 Stars Global Hangar boss said.

According to him, the hangar will take about 8 Boeing 737s, noting that even if other local MROs build the same capacity as his company, the industry will not be able to meet up to 50 percent of the demand.

Balami hinted that to move to the UK, Europe, Ethiopia, Dubai, America, Asia, an operator can spend as much as $65,000 to $100,000 on fuel on one airplane, apart from navigational charges, landing charges, transport, visa fees for the crew, and cost of hotels for two to three months.

He said if aircraft maintenance is done locally, about $1 billion dollars will go into the pockets of Nigerians.

Sheri Ayuba Kyari, an aircraft engineer and former president of the National Association of Aircraft Pilots and Engineers (NAAPE), told BusinessDay that he has also seen a surge in aircraft maintenance locally.

Kyari said C-checks are done in Nigeria for some planes which come with low manpower rates.

He said before now, airlines preferred to go outside the country for maintenance because they used the opportunity to source for dollars at very low rates from the CBN.

But with the unification of dollars, he said, an inhouse maintenance facility has been able to carry out two C-checks on Dana Air’s MD aircraft and it is currently handling Azman B737.

“The 7 Star and Aero MRO are in the country and their rates are not the same. The factors that will culminate into the total cost of maintenance are not going to be the same. Some may use more funds and hands to get the aircraft out in a shorter time. Another may use minimal hands and maximum time,” he said.

Ibrahim Mshelia, a captain and owner of West Link Airlines Nigeria and Mish Aviation Flying School, said despite the local maintenance firms available, the shortage of MROs in the country is still a real concern.

“Every hour you fly, there is a maintenance cost required. Keep it somewhere, don’t spend it. I did it. When the maintenance is due, the money is there to pay for it.

“There was no time I took my airplane for maintenance and not pay to bring it back except something went wrong with the aircraft and I needed insurance to cover the costs,” he said.

The captain said airlines need to access dollars at rates that would help their day-to-day operations.

More indigenous companies are looking at investing in MRO seeing the opportunity in the untapped market.

For instance, Nigerian carrier, Ibom Air, is looking to establish itself as an MRO provider for the African continent, mirroring the likes of EgyptAir, Ethiopian Airlines and Kenya Airways.

More recently, Ibom Air is working with Airbus Consulting on its maintenance strategy for the next six to eight years, which includes plans for full scope A220 work.