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Insolvency looms as cash dries up for airlines’ operations

Wole Shadare Size, they say, matters. But in aviation, size no longer matter as airlines are re-thinking their business model as they plan to jettison their big, fuel guzzling B737 which is dominant in Nigeria’s aviation with small size, fuel efficient airplanes.

 

Consequently, aircraft lessors are considering repossessing their airplanes or cause the operators to return the aircraft for fear of defaulting in lease payment. Already, aircraft lease for Nigerian carriers jumped up astronomically since the Dana Air incident in which over 150 lost their lives in Lagos suburb of Iju Ishaga eight years ago.

 

Then, major aircraft leasing firms such as GE Capital Aviation Services (GECAS), International Lease Finance Corporation (ILFC), Cab Tree and Aercap raised lease on aircraft to Nigerian airlines by over 20 per cent and further raised it by another five per cent.

 

But with the recent panic of near insolvency of airlines, the lessors – GECAS, ILFC, Cab Tree and others – monitor events in the country’s aviation sector and quickly react to safeguard their equipment.

 

There are indications that Nigerian carriers have exhausted cash to continue to pay for the leases as passenger traffic have continued to dwindle since Federal Government lifted ban on domestic air travel on July 8, as many of the airlines record far less than 20 passengers on each of their trip, a situation that has made their bleeding to continue.

 

A top airline chief confided in New Telegraph that the initial enthusiasm that greeted re-opening of domestic flight operation has disappeared as they daily record less than 50 passengers on their B737 airplanes; amount, he said, does not cover cost of fuel which takes about 35 per cent of operations. He, however, stated that some of them have to tinker with their business model to go for smaller, cost efficient smaller jets to remain in business.

 

It is feared that by the end of the year, only two carriers might survive as many, including the big airlines, are showing signs of insolvency. Investigations by New Telegraph shows that at the Lagos airport, many B737 dot the tarmac, just as many of them are still in storage for lack of usage occasioned by people’s reluctance to travel by air.

 

 

Nigerian scheduled airlines have about 65 airplanes, majority of them made up of B737 classics and few B737NG. The breakdown shows that Dana has nine aircraft with two ferried out for maintenance offshore; Arik Air operates seven B737; Aero has five, but two are undergoing maintenance Overland Airways has nine aircraft.

 

One is outside the shores of Nigeria for periodic maintenance; Air Peace is reported to have about 24 aircraft; Ibom Air has four narrow body CRJ planes; Max Air six airplanes made up of three B737 and three B747 and Azman Air has three aircraft including A340.

 

Reacting to the bleak future of airlines in the country, a former Managing Director of Virgin Ni-geria Airlines, Capt. Dapo Olumide, painted a grim picture of the industry and called for urgent re-think by airline owners.

 

He said airlines’ problems are self-inflicted wound with use of wrong type of aircraft for domestic operations. He predicted that by the end of this year, there would be no more than two airlines flying because of huge overhead, querying how many of the aircraft are owned by the operators.

 

His words: “You are leasing these aircraft in dollars. You are not leasing them in naira or Indian rupees. The dollar that you leased them at the time was probably N360/$, now the dollar is N500. The problem of the airlines as they are now is self-inflicted wound.

They have wrong type of aircraft for domestic operations.” Director of Maintenance, Ibom Air, Lookman Animashaun, an aircraft engineer, told our correspondent that the best option left for airlines was to re-fleet and come up with good business plans that could make them to remain in business post COVID-19.

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