Adam: Nigerian carriers to save over N26B annually with aircraft dry-lease

Senior Advisor for Aircraft Acquisition and Sales, Aviation Strategy, and Government Affairs, Superba, Nuhu Adam said Nigerian airline operators would be saving over N26 billion annually with aircraft dry lease that the carriers are potentially going to enjoy on a large scale as the Federal Government paved the way for the reprieve for the operators.

Nigeria’s Minister of Aviation and Aerospace Development, Festus Keyamo, successfully secured access to the dry lease option for its airlines by implementing a series of critical legal and administrative reforms aimed at restoring the trust of international lessors and financiers.

This culminated in the signing of the Irrevocable Deregistration and Export Request Authorisation (IDERA) by the Nigeria Civil Aviation Authority (NCAA) that formally empowers the lessor (the “authorised party”) to apply directly for the deregistration and export of the aircraft without the lessee’s cooperation in the event of default.

For over a decade, lessors had largely restricted Nigerian carriers to the more expensive wet lease model, perceiving the country as a “high-risk” jurisdiction due to past defaults by local airlines and a challenging legal environment for asset recovery.

The breakthrough was achieved by addressing the core concerns of the global aviation financing community, primarily the Aviation Working Group (AWG) (co-chaired by Boeing and Airbus).

Adam, who spoke to Aviation Metric at the weekend, noted that the benefits are unquantifiable, stressing that one of the issues that led to the problems of the defunct Virgin Nigeria, apart from the alleged high corruption and interference in the airline, was the cost it spent on wet-lease of virtually all the airplanes the carrier used for all its operations.

Dry leases are inherently cheaper than wet leases because the airline only pays a fixed monthly rate for the aircraft itself. It avoids the high hourly cost of the lessor’s all-inclusive package.

Breaking down the huge cost of wet lease aircraft, the expert said, “Nigerian airlines approximately spend N26 billion annually on the aircraft lease arrangement. Take, for instance, a B737-800. It takes about 13 crew to be on that aircraft, including cabin crew, engineers and people in the flight deck”.

“When you look at their hotel accommodation, you have an average of $90 per crew of about 13. Every day, an airline spends about $1530 on its hotel accommodation. Virtually all the airlines have wet-leased aircraft. Multiply that daily, monthly and yearly. That is huge. You pay them daily per diem. It also depends on the level of negotiation. Then, talk about crew transport from hotel to their place of work and reposition, immigration cost and costs of tickets for them to travel when they are off-duty”.

“Air Peace is having about four A320 all wet-leased. Others are having the same on the register of the NCAA. It is a good thing that the Federal Government is doing this for the airlines because it will save them a lot of money. One of the greatest problems we had with Virgin Nigeria, apart from the government issue, was the cost of the crew”, he added.

Adam further admitted that dry leasing is a huge win for Nigerian airlines’ operational and financial strategy, but its success hinges on the local industry’s ability to develop robust MRO and insurance infrastructure to manage the operational risks it inherits.

The cost impact of dry leasing on Nigerian airlines is overwhelmingly positive, acting as a strategic tool to drastically reduce operational expenses, curb capital flight, and build local aviation capacity.

The shift to dry leasing is particularly impactful because Nigerian carriers have historically been forced to rely on the far more expensive wet lease (ACMI) model due to a “high-risk” perception by international lessors.

Wole Shadare