Banks see huge risks in Nigerian aviation, says airline chief

• Carpets carriers on wrong plane types
• Invests $150m on new helicopters

Citing huge risk in Nigeria’s aviation sector, lenders are averse to investing and assisting airlines and other aviation service providers, President and Chief Executive, Tropical Arctic Logistics Limited (TAL), Emperor Chris Baywood Ibe, has said.

He disclosed this to Woleshadarenews shortly after the launch of his helicopter airline service and six of AW139 helicopter and a Challenger fixed business executive jet valued at $150 million.
Ibe said banks are reluctant to extend huge credit exposure to the aviation industry because they are yet to understand the sector very well.

This obstacle, he said, propelled him and his team to self-fund the start-up airline from proceeds from his other businesses.
The airline chief equally faulted many domestic carriers for the wrong aircraft types in their fleet, describing the use of regional aircraft such as B737 on one hour domestic operations as sheer waste of resources.
That aircraft type according to experts are not fuel efficient and costly to maintain whenever they are due for maintaining ,coupled with lack of maximally utilising them.

He added that his firm was considering venturing into scheduled flight operation, but noted that they would do things differently by operating more cost efficient aircraft such as the Embraer and other fuel efficient fixed wing aircraft.

His words: “Nigerian banks see huge risks in aviation; the reason we did not approach any bank for money. Our investment in this airline is from proceeds from our other businesses. Tropical Arctic Logistics, a Baywood company, was established in 2013 to provide professional solutions with particular emphasis on safety and efficiency.
“Our helicopter company offers business-beneficial services to the Oil and Gas industry, Executive Spot Charter, Banking Industry, Medical Emergency Evacuation (MEDVAC) and allied services as well as executive private aircraft charter.

“We are considering starting scheduled service operations. But we are going to use the right aircraft types and not B737 that airlines are using. It makes no sense operating B737 for 50 minute flight,” he said.
Besides, he said that the company’s operational safety policy both onshore and offshore is one of the key attributes, which will achieve tremendous resonance among stakeholders.
“This is one of the reasons why Tropical Arctic Logistics is poised to achieve incomparable heights in customer service standards”, he added.

A chief executive of an airline who pleaded anonymity, said that the present interest regime of banks makes it difficult for Nigerian airlines to borrow money, stressing that this has affected the acquisition and leasing of commercial aircraft in Nigeria.
“The present interest rate regime in Nigeria is not good for aviation. Take the 20 something per cent interest rate; you can’t do any business with that. So we need to do something about that. Banks need to at least do single digit interest. Then when you do that the big banks will lower their interest rate and that is good for Nigeria and SME companies can progress. I think that is what we should do.”

He added that because there is poor corporate governance. it is difficult for banks to support the airlines with huge funds, noting that there is poor legal system and lack of integrity in the management of some of the airlines.He noted that the banks are yet to know how the industry works and until their personnel are trained to understand the aviation sector, banks may not be able to fund huge investments in the sector.

He said that many banks are yet to know how the industry operates, especially the value of the equipment (the aircraft) and that explained why the past funding of aircraft for airlines were not particularly successful, which led to liquidation and the interference of Asset Management Corporation of Nigeria (AMCON), which today has absorbed the liabilities of these airlines.

The source remarked that banks may not be able to provide the credit support for airlines to acquire new aircraft because of the huge finance involved .
He noted that the banks would rather lose money by using it to train its staff to understand the sector than precarious exposure of their funds to the capital intensive aircraft acquisition.

Some airlines noted that that airlines may fail to repay loans or become bankrupt due to other factors such as poor and inadequate infrastructure, which curtail their operations and made them to lose money.