Experts in the aviation industry have offered prescriptions on how to fix lingering challenges militating against the growth of the value chain.
President of the Aircraft Owners and Pilots Association of Nigeria, Dr. Alex Nwuba, Managing Director of Aero Contractors Airlines , Captain Ado Sanusi and former rector of Nigerian College of Aviation Technology (NCAT), Captain Samuel Caulcrick said intentional policies and intervention will rescue the industry from collapse.
Speaking in an interview , Nwuba urged the Federal Government to establish a 500-aircraft national leasing company to reduce the high finance cost burden on domestic airlines and make the industry more competitive.
Nwuba said that aviation in Nigeria remains profitable but is weighed down by excessive finance costs that prevent sustainable growth.
According to him, while the global aviation profit margin ranges between three and seven percent, Nigerian airlines face a borrowing interest of 28 to 34 percent. “That finance cost automatically kills competitiveness,” he said. “The government can intervene by creating a leasing company that owns 500 aircraft and makes them available to operators at four percent interest. That is how you make them globally competitive.”
He explained that the government could negotiate low-interest credit abroad and acquire aircraft under a favourable funding structure. “You can borrow in Japan or the United States at 0.2 to three per cent, buy airplanes, and lease them locally at a reasonable rate. When one airline fails, the aircraft can be reassigned to another. That keeps capacity in the system,” Nwuba said.
He emphasised that aviation was not unprofitable but burdened by a finance cost that stifles growth. “We must change the narrative. The industry is profitable, but the cost structures imposed by bad policies make it appear otherwise. About 47 percent of every airline’s revenue goes to fuel alone. How do they survive year after year?” he asked.
Nwuba urged the government to create policies that provide cheaper access to capital and remove cost barriers preventing airlines from thriving. “We need to borrow at one or two percent. We need aircraft that are affordable. That is the only way to reduce fares, boost capacity, and cut finance costs for operators,” he added.
Another major player, Sanusi, said local airlines also suffer from policy inconsistencies and high operational charges, which have worsened their cost structure and increased their finance cost, eroding profitability.
Captain Sanusi said the inconsistency of government policies was a major factor driving the high finance cost and rising airfares. “Some airlines need urgent capital inflow to stay operational, but the cost of doing business keeps rising because of policy instability,” he said.
He also called for a review of airport infrastructure nationwide, noting that most local airports lag behind in passenger experience. “We’ve seen improvements at the international airports, but local airports need serious attention. The time it takes passengers to process flights must reduce, and facilities should improve. Both government and private operators must close the gaps through dialogue,” Sanusi said.
Also speaking, Caulcrik said limited capital restricts growth for airlines, as it hampers their scope of operations.
He said, “The rest of Africa must understand that the major challenge facing African airlines, including Nigerian carriers, is that the lack of access to affordable capital will continue to impede their ability. Limited capital restricts growth, making it harder to compete with larger, often government-backed airlines.
He further added, “Nigerian carriers need to invest in a modern fleet. Older, less efficient aircraft drive up costs and decrease competitiveness. Limited capital hampers route expansion and market reach.
“Restricted access to capital raises operating expenses, reducing profits. The industry needs to consider consolidation with stronger carriers acquiring or partnering with weaker ones. Exploring other financing options, such as Islamic finance or infrastructure bonds, or establishing an aviation development bank to facilitate affordable capital to local airlines within their economies using sovereign backing.
“Governments would offer targeted support, like guarantees or subsidies to route development, to help industry growth.
“Promoting regional collaboration and partnerships to share resources and expertise.
“The lack of access to competitive lower capital costs in emerging markets, like Nigeria, sticks out like a sore thumb in the global air transport business.”
SOURCE: THENATION
