Friday, 17 August 2012

Aircraft lease rises as lessors classify Nigeria ‘high-risk’ nation

It is another tough era for operators in the Nigerian aviation sector as wary international aircraft lessors have classified the country among “high-risk nations” for doing business.

The ‘strange status’ for the country is linked to the Sunday, June 3, 2012 crash involving Dana Air’s Flight 0992 in Lagos.

Due to the air mishap which claimed the lives of passengers and crew members, major aircraft leasing firms such as GE Capital Aviation Services (GECAS), International Lease Finance Corporation (ILFC), Cab Tree and Aercap have raised lease on aircraft to Nigerian airlines by over 40 per cent and with a plan to hike it to 50 per cent soon.

Prior to the Dana accident, a B737-500, which was leased for $120, 000, now attracts $200, 000 monthly.

For the new generation airplanes that are in high demand and popularly referred to as Next Gen (that is aircraft below 15 years), the lease, according to airline operators, has risen to $280,000 per month from $160,000.

Some airline chiefs, who spoke with The Guardian on the development, lamented that coupled with the declining passenger traffic, it has become very difficult for them to cope.

The lease remained stable from 2006 to June this year following near impeccable safety recorded in the aviation industry.

Added to this, is the belief in the international aviation sector that Nigerian operators lack skills in negotiating for aircraft lease; which has led to most airlines to be on the receiving end. Most local airlines are said to lack the ability to understand minimum flight hour and engine cycles for aircraft under lease.

Also, the dwindling of the sector, particularly the fortunes of the carriers, has equally made lease rentals to be on the high side because the foreign firms do not trust Nigerian operators enough with their equipment.

Currently, just three airlines among the hitherto big carriers are operating. Air Nigeria was over two months ago grounded over insolvency and safety issues. Dana Air remains grounded after the tragic accident that claimed over 153 persons, while First Nation Airlines has ferried its aircraft to Europe for mandatory maintenance checks. The airline is expecting its A320 airplanes back in the country.

The new high cost of lease is expected to affect the whole fiscal operations of the airlines, as they now find it difficult to buy fuel, pay workers’ salaries and still have enough operating cash.

Source: Guardian


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