• Thursday, April 18, 2024
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How country risk, reputation make aircraft leasing difficult in Nigeria – Okonwo

United Nigeria Airlines to scale down operations over aircraft maintenance

Osita Okonkwo, the Chief Operating Officer of United Nigeria Airlines has said that high country risk and the bad reputation of some airlines that failed to abide by lease agreements in the past made aircraft leasing very costly in Nigeria.

Okonkwo said that one of the major challenges domestic airlines face is the acquisition of aircraft by purchase or by lease.

He explained that lessors do not allow dry lease in Nigeria, which enables an airline to lease an aircraft for a long time, register it locally and operate it with its full crew.

According to him, the lessors allow wet lease, which is short time leasing where the lessor provides the crew and which comes at a very high cost.

He however said Festus Keyamo, the Minister of Aviation and Aerospace Development, has advanced in his negotiation with lessors and aircraft manufacturers to review the country risk clamped on Nigeria and also to withdraw the decision not to allow dry or long-term lease to Nigerian carriers.

Okonkwo made this known at the Murtala Muhammed International Airport, Lagos recently, during a news conference to mark the three years of the airline as a scheduled, commercial operator.

According to Okonkwo, the minister has met with the international lobby group to prompt the lessors to remove Nigeria from their blacklist and this includes Aircraft Leasing Group (ALG) comprising the two largest aircraft makers, Airbus and Boeing.

“Our appeal is that we don’t miss out on opportunities. Nigeria is the largest market in Africa. The potential is there. The market is large. The minister is on top of this issue. It would help that Nigeria is removed from country risk on aircraft dry lease. The country risk rating has hampered our operations and we are exposed to wet-lease which is very expensive,” he added.

He also spoke on aircraft insurance, stressing that Nigerian insurance companies cannot wholly insure an aircraft.

He however stated that the National Insurance Commission (NICON) insists that aircraft insurance must go through local insurers, but lessors give it as a condition that their aircraft must be insured in New York, London, Singapore, Dubai and other international cities.

According to him, even if an airline purchases an aircraft, it is an international requirement that it has to be insured, but no insurance company can do that in Nigeria, especially for bigger aircraft.

“The other one on insurance is that there is no capacity internally to do big aircraft insurance in Nigeria. So, many lessors are not operating in Nigeria because of insurance.

“It is killing business because even though you want to do indigenisation, you cannot do that with another person’s assets. Even if you buy an aircraft today, it is a requirement that you have to insure it even if you pay with your money in Boeing, Embraer or whatever.

“The insurance must cover Boeing even though they have sold it to you, they must be party insured in that transaction. So you can’t escape the international requirements of the business and limiting it locally will not help lessors,” Okonkwo said.

He also disclosed that the major factors that contribute to the increased price of flight tickets include the charges they pay for the use of the airports in the country, the high cost of aviation fuel and other charges paid to aviation agencies.

Okonkwo, who said that the Minister of Aviation and Aerospace Development, Festus Keyamo, would soon solve the problem of paucity of aircraft among Nigerian carriers, stated that in addition to passenger service charges, which they pay to the airports, they still pay landing charges and also pay extra charges if they operate to sunset airports after 7:00 pm.

These, he said, include the airports that officially shut down by 7:00 pm but can extend their services with additional payment by airlines.

The payments, it was learnt, are as follows: Asaba Airport collects, N8000 per passenger, MMA2, Lagos, N7000, Chinua Achebe Airport, Umueri, Anambra state, N8000, the Federal Airports Authority of Nigeria (FAAN) collects N2, 000 per passenger for domestic flights, $100 for international flights and $20 for security charge.

In addition, the sunset airports charge N500,000 for every extended one hour, which starts counting by five minutes past 7:00 O’clock.

The airports also charge N25,000 for every landing of aircraft and all these monies are built into other charges which include a 5 per cent ticket charge, which the Nigeria Civil Aviation Authority (NCAA) collects on behalf of aviation agencies.

Okonkwo said that when these charges are put together they increase the cost of flight tickets and stressed that in cognisance of the exchange rate, the high cost of aviation fuel, which has risen to N1,300 per litre, the average cost of a ticket should be between N150, 000 to N200, 000.

He however stated that knowing the economic situation in Nigeria, only a few would afford to travel by air with commercial airlines, insisting that the airlines record losses at lower cost of tickets but have to keep providing the critical service of lifting Nigerians from one city to another.