At a media briefing with aviation reporters in Abuja last year, officials of Airbus, amplified this sentiment when asked why Nigerian airlines find it difficult to access aircraft and spare parts on dry lease. They explained that in the past, international aviation companies have had their fingers burnt while doing dry lease agreements with Nigerian operators, hence they are now more cautious.
FG’s pledge
In December last year, the federal government pledged to provide guarantees to aircraft leasing companies for the recovery of their assets leased to Nigerian airlines in the event of default. The Minister of Aviation and Aerospace Development, Festus Keyamo, gave the assurance during a courtesy visit by officials from Boeing and Aercap. The delegation was led by the chairman of Air Peace, Allen Onyema, where Boeing and Aercap stated their willingness to offer Nigerian carriers dry lease opportunities, but on certain conditions.
At the meeting, Keyamo assured Boeing, Aercap and other lessors that the federal government would guarantee the release of their assets from any domestic carrier whenever there is a default. He also promised that they would not be shortchanged and that the government would do everything necessary to safeguard lessors’ assets from airlines in the case of default. He urged lessors to always inform the federal government about the airline they are dealing with so that the government would carry out due diligence on the operator’s financial status and other vital records.
Why dry lease is a better option for airlines
Dry leasing agreements typically offer airlines more profitability compared to wet leasing and allows for more flexibility and efficiency. With this arrangement, airlines have full control over the aircraft’s operations, including routes and crew management. Also, all the revenue generated from the aircraft’s operations goes directly to the airline and the carrier has direct control over operating costs such as fuel, maintenance and crew salaries, which enables them to optimise expenses.
However, despite last year’s assurances by the federal government, existing local carriers continue to bear the brunt of the blacklist on the country as they are still left to grapple with the difficulties of assessing aircraft on dry lease. Most of them have no choice than to either do an outright purchase, or include planes gotten through wet lease agreements to their fleet and in some cases, some of them (Air Peace and Azman) have been defrauded by fraudulent international lessors according to the Airline Operators of Nigeria.
FG knocks wet leasing
The federal government blamed wet leasing for hindering the growth and sustainability of Nigerian airlines. At a meeting between Keyamo and the leadership of the National Association of Nigerian Travel Agents (NANTA), held earlier in the week at the Minister’s office in Abuja, he spoke on the need to transition to dry leasing to empower local operators and boost the sector because wet leasing of equipment is not sustainable.
He said: “My mission is to restore the glory of the Nigerian aviation industry, and that is why I have embarked on visits to aircraft manufacturing companies to help our local investors acquire aircraft. We need to open up the market for dry leasing to Nigerian operators. Wet leasing is killing our capacity to grow the sector sustainably. It is my major concern to empower Nigerians.”
At the meeting, the president of NANTA, Yinka Folami, appealed to Keyamo to intervene in the travel industry and accused foreign players and their local partners of unfair competition. He lamented a 40 per cent market decline due to their unchecked cross-border activities.
Folami said that while welcoming global players, they should adhere to fair practices and desist from manipulating fares, which he said harms the Nigerian economy and its consumers. He warned of job losses due to market erosion caused by business malpractice and urged the government to impose sanctions on those engaging in unethical practices, characterising their actions as economic sabotage.
He said: “We have no problem with global players in our market, but they should play fair, and stop encroachment of global fares with its attendant depressing effect on the Nigerian economy, and on the Nigerian traveler. Our market is eroded by this development, and jobs are threatened. So, we want the government to initiate policies to check these unethical practices and, and where necessary, sanctions them for economic sabotage.”
Poor business plans, weak regulation responsible for airlines’ woes –Expert
On the disadvantage of wet leasing, an aviation expert blamed the problem of capacity of Nigerian airlines on poor business plans and insufficient oversight by the economic regulatory authority in the lease processing. He told Daily Sun that many airlines enter the market without realistic business plans and adequate financial projections. He said risk assessment leads to operational challenges and that there is an overreliance on government support rather than sustainable business models.
“Check, the lifespan of our domestic airlines, how many of them have lasted 10 years without being in recurring debts locally and externally? How many have collected government intervention funds and have not refunded but collapsed? “Everything boils down to ineffective oversight and enforcement of the economic regulations by the responsible authority, which is the Nigerian Civil Aviation Authority (NCAA). There is also the issue of political interference from the political office holders in the administration of our government and the management of the agencies,” he said.
Source: The Sun
