Jibodu: Why airlines can’t breakeven

…Urges carriers to embrace dry-lease option

The Chief Operating Officer of Bi-Courtney Aviation Services Limited, operator of Murtala Muhammed Airport (MMA2), Remi Jibodu said it is practically impossible for airlines to break-even because of high Banks’ interest rates and other challenges that the carriers are faced with.

He reiterated that the high interest rates of about 30 percent from financial institutions coupled with inflation standing at 27.4 per cent makes it extremely difficult for airline business to thrive in the country.

Jibodu stated this on Tuesday when the executive members of the League of Airport and Aviation Correspondents (LAAC) paid a courtesy visit to the company’s office at MMA2 in Lagos.

He emphasized that high aircraft leasing costs have forced airlines to return aircraft, reducing available seat capacity. He highlighted that interest rates exceeding 30% and inflation around 24.7% have made financing difficult for airlines, limiting their operations.

He said, “Unless you have private funds; if you look at the financial institution, vis-a-vis what is happening in the industry now, you have interest rates of about 30 per cent plus. The inflation is about 24.7% or thereabouts. So it means that if you are borrowing money from the bank, it is going to be very difficult for you to breakeven, especially when they are putting the cost in terms of lease agreement on you”.

He emphasised the importance of dry-lease as opposed to wet-lease for the country’s airlines, stressing such arrangement would help the carriers to keep their crew which  also help them develop indigenous pilots in Nigeria, increase revenue and be able to employ more people.

Jibodu raised concerns over passenger decline at many of the country’s airport terminals including the MMA2, citing economic instability and airline capacity challenges as key factors.

He noted that since April last year, passenger traffic has declined, particularly after Dana Air ceased operations. He attributed this drop to financial pressures, rising lease costs, and economic fluctuations.

He lauded the implementation of the Cape Town Convention Practice Direction which he believes will provide airlines with easier access to dry lease agreements.

He explained that the CTC framework streamlines aviation equipment financing, reduces costs, and offers airlines greater flexibility in crew selection. He noted that by leveraging CTC provisions, airlines can operate more efficiently and avoid the financial strain associated with traditional leasing models.

Jibodu pointed out that while Lagos, Abuja, and Port Harcourt remain busy, other routes are underserved. He suggested that the government develop trade hubs around airports to boost economic activities and justify increased airline capacity.

The COO stressed the importance of productivity in increasing passenger traffic. “Traffic is driven by economic productivity. If the economy improves, we will see a stable and significant rise in passenger movement,” he said.

Despite the challenges, Jibodu remains optimistic that 2024 will record better passenger figures than 2023. He noted that the recent stabilization of foreign exchange could improve airline operations. However, he urged the government to support airline growth and infrastructure development to enhance passenger traffic at Nigerian airports.

Wole Shadare