Aircraft shortage forces airlines into lease pacts
The dust raised by top politician and Special Adviser to President Muhammadu Buhari on Political Matters, Senator Babafemi Ojudu, over “shocking’ discovery of foreigners operating an unmarked aircraft on behalf of Arik Airline has been calmed following the airline’s explanation of events.
Ojodu’s outburst had generated public interest with a section hastily linking the development to the much familiar Nigerian factor, which entails lacklustre approach to issues.
The top government official, in a lengthy statement to the media, said he bought an Arik Airline ticket recently to travel from Lagos to Abuja, adding that when the bus took them to the foot of the plane, they saw that the plane was not branded.
His words: “This was to be my first shock. On entering the plane to take my seat, I saw that all the crew were Arab sounding male and female. Arik? What is happening? Has it been sold? If so when? Which company bought it? My curiosity as a reporter will not stop there.
“On sitting down, I went for the pocket of the sit and saw the safety card with the inscription Syphax Airline. So also was the inscription on the uniform of the hostess. I went and consulted Google and found this was a Tunisian airline, established in 2011 and packed up in 2015.”
However, stakeholders have faulted the position of the Ekiti-born politician, saying Arik went for a leased plane as sanctioned by the Nigerian Civil Aviation Authority (NCAA).
A top official of Arik, who spoke under strict condition of anonymity, said the aircraft was on lease and, by law, the owners are supposed to operate it, stressing that “whatever we are doing is within the laws of the industry. Our media team will respond appropriately.”
Findings by New Telegraph showed that just recently, precisely November 2019, Nigeria’s biggest airline, Air Peace, leased a B737.800 air plane from Euro Atlantic and still operating the aircraft as at last week. The airplane is on wet lease agreement.
In 2018, Medview Airlines wet-leased B737NextGen aircraft. Just at the weekend, Nigeria’s domestic airline, Azman, leased wide-body A340-600 airplane from airline giant, Etihad.
A wet lease is a leasing arrangement whereby one airline (the lessor) provides an aircraft, complete crew, maintenance and insurance (ACMI) to another airline or other type of business acting as a broker of air travel (the lessee), which pays by hours operated.
Dry lease, on the other hand, is when the airplane is operated by the lessee with its crew.
Airlines lease aircraft from other airlines or leasing companies for two main reasons: to operate aircraft without the financial burden of buying them and to provide temporary increase in capacity.
A former Assistant Secretary-General of Airline Operators of Nigeria (AON), Mohammed Tukur, told this newspaper that globally, airlines operate a fleet of over 27,000 commercial aircraft valued at over $696 billion (active and parked aircraft).
He further disclosed that airlines relied heavily on third-party debt and equity to finance these capital-intensive assets, stressing that third-party equity to finance the aircraft has increasingly been provided to the airline industry by aircraft operating lessors, which acquire and lease aircraft to airlines as their lessees.
“Today, over 13,300 commercial jet aircraft, valued at approximately $331 billion, are owned by operating lessors and leased on this basis to the global airlines, representing more than 49 per cent of the fleet by value,” he noted.
With demand for travel still growing at a strong pace, relatively low fuel prices, low inflation and manufacturers’ healthy backlog, the role of operating leases in the airlines’ financing strategy will only accelerate.
Over the next five years, ICF expects the value of jet aircraft deliveries to average more than $135 billion per annum, split approximately evenly between narrow body and wide-body jets, with regional jets taking a small share.
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