Aircraft lease to Nigerian operators to rise by 20% over Lyold’s threat
*Insolvency, panic, as airlines risk grounding as insurance expires
*Experts warn of consequences
Nigerian carriers are beginning to panic over a recent disclosure that Lyold of London are planning to blacklist Nigerian airlines over their inability to pay their insurance premium.
Lloyd’s of London, generally known simply as Lloyd’s, is an insurance market located in London’s primary financial district, the City of London. Unlike most of its competitors in the industry, it is not an insurance company.
The insurance business underwritten at Lloyd’s is predominantly general insurance and reinsurance, although a small number of syndicates write term life insurance.
A chief Executive of one of the local airlines who spoke to woleshadare.net on condition of anonymity said his carrier was already meeting with the insurance firms on how to renegotiate its premium owing to the tough economic situation that Nigeria currently faces.
The source stated that many of Nigerian carriers could be grounded as early as February next year when many of the carriers are expected to renew their premiums.
The source who pleaded that his identity should be hidden because of panic it would create in the sector said insurance.
He said the situation has the tendency to push up aircraft lease rentals as lessors are becoming worried about the news that near insolvency is pushing them to re-assess business deals with airline operators in the country.
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 four 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, former Assistant Secretary General of Airline Operators of Nigeria (AON), Mohammed Tukur said the threat by the insurance body to blacklist Nigerian carriers would push aircraft lease by another 20 per cent, adding that GECAS, ILFC , Cab Tree and others monitor seriously events in the country’s aviation sector and quickly react to safeguard their equipment.
Prior to the Dana accident, a B737-500, which was leased for $120, 000, now attracts $180, 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, rose to $240,000 per month from $160,000.
Some airline chiefs, who spoke 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.
Aviation security consultant and former Commandant, Murtala Muhammed Airport, Group Captain John Ojikutu (rtd) said the latest threat coming from Lloyd of London to blacklist Nigerian domestic airlines over unpaid premium on their operations has again justified his recent call that these airlines’ foreign earnings in particular, be audited by the Nigerian Civil Aviation Authority (NCAA).
His words, “The threat coming from Lloyd means that these airlines are operating without adequate insurance cover; it also means that they cannot effectively sustain their operations in the event of any serious incident or accident as they would have no secured financial resources to indemnify cost of injuries or to compensate victims of airlines aircraft accident if the need arose.”
Ojikutu stated that the country needs to learn lessons from previous accidents where some airlines were unable to fulfil their obligations to the victims of their airlines aircraft accident because of inadequate insurance cover.
“Even till today, the NCAA finds it difficult to compel these airlines to provide adequate compensation to the victims in spite of the Warsaw Convention on compensation for airlines aircraft victims.”
He reiterated that the Lloyd threat has not only justified his call for auditing these airlines, it also shows that the extent of their indebtedness is beyond the Nigerian borders.
“My call for airlines earnings audit and the Lloyd’s threat to blacklist them are wakeup calls to the NCAA to determine the level of the airlines indebtedness to the various safety services providers and ground handling services providers; banks and insurance; staff salaries and FIRS; etc.”
The aim he said is to determine also if their call on government for foreign exchange can be justified where those on continental and intercontinental routes could be earning average of $500,000 on passengers ticket sales and cargo charges every week.
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