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Redeeming Nigeria’s image with CTC practice direction
The signing of Cape Town Convention practice direction is an unprecedented history made and it is a venture that will boost the Nigerian airlines and the entire aviation industry as a whole, writes, WOLE SHADARE
CTC domestication
Nigeria ratified and domesticated the Cape Town Convention in 2007. It came at a point when it was very difficult to acquire aircraft on wet and dry leases because of the poor safety record of the country’s aviation industry at the time.
It was a period when aircraft were falling from the sky occasioned by the two plane crashes involving Sosoliso Airlines and Bellview Airlines that killed nearly 400 passengers. It was equally a period average age of aircraft in the sky of Nigeria was 26 years.
The reaction of the government to find an urgent solution to the bad image of the country in the aviation business prompted the review of the country’s aviation processes that helped to restore albeit temporarily the image of the sector.
One of the first moves was for the country to be a signatory to the Cape Town Convention which gives the country’s airline operators easy access to aircraft on a lease basis.
Opprobrium
The Cape Town Convention was not foolproof that the country’s airlines would get aeroplanes at a favourable term. It lacked the legal backing and exposed the loopholes that allowed airline operators to seek refuge in a law court to frustrate owners of equipment to repossess their assets at the end of violation of the term of the agreement.
In the past, some operators rushed to seek an injunction in a law court, making it extremely difficult for repossession. This earned the country opprobrium, leading to a blacklist by aircraft lessors, particularly the Aviation Working Group, co-chaired by Airbus and Boeing.
The operators’ default to adhere to the terms and conditions of aircraft lessors made it extremely difficult to trust the country’s operators with their airplanes because of the fear of not getting them back again and in the same condition as before the lease.
Thursday last week, the Federal Government signed the Cape Town Convention (CTC) Practice Directions.
Legal backing
The CTC Practice Direction was signed by the Chief Judge of the Federal High Court, Justice John Terhemba Tsoho, during a stakeholders’ meeting of the Presidential Enabling Business Environment Council (PEBEC) chaired by Vice President Kashim Shettima at the Presidential Villa, Abuja.
Many stakeholders have expressed joy with the CTC Practice Direction and lauded the Federal Government for taking the Cape Town Convention treaty a notch further saying it would help the airlines to acquire more aircraft, reduce the high premium on insurance for leased aircraft and generally revitalize the sector.
Experts’ views
Chief Executive Officer of Belujane Consult, Mr. Chris Azu Aligbe said with the signing of the CTC Practice Direction, the Cape Town Convention becomes actively and fully operational in Nigeria, thereby reducing the cost of insurance for airlines, restoring investors’ confidence in the nation’s aviation sector and enabling domestic airline operators to dry lease aircraft, among others.
He noted that the import of it is that they have successfully brought in the judiciary so that whenever any such case goes to court, they will throw it out.
He further stated that the confidence they are trying to give to the international community and leasing community is that Nigerian courts will no longer entertain any such case intended to block the deregistration of the aircraft and almost make it mandatory that whenever there is a default, they get their aircraft back.
His words, “Some local operators had, in the past, breached the Cape Town Convention which regulates aircraft leasing across the world, leading to the Aviation Working Group, co-chaired by Airbus and Boeing, saying Nigeria would be blacklisted until it implements a law that would guide against a repeat of such breach.”
“The second thing which is a major step which they need to follow up with is to put a sanction on violators. Nigeria must complete this great thing they have done. For me, it is good and very positive but to complete it, there must be a sanction for violator. Violators must be made to lose their Air Operator Certificate (AOC) for a certain number of years to be a deterrent to anybody trying to violate it.”
Director of Human Resources, Nigeria Civil Aviation Authority (NCAA), Dr Anastasia Gbem who represented the Minister of Aviation and Aerospace Development, Mr Festus Keyamo at the signing of the CTC Practice Direction told Aviation Metric said, what was going on even though Nigeria domesticated the Cape Town Convention, was a situation where “We were not complying in the sense that that convention provides for remedy if there is a default by the operator.”
“In our situation whenever there was a default by not making the owners of the aircraft repossess their aircraft, they will now run to the court and get an injunction. You know that when you file in court, there is nothing anybody can do. You can see that some of these aircraft are just lying fallow because of one litigation or the other.”
“That had impeded the effective implementation of the Cape Town Convention. When you do that a lessor is hindered access to the aircraft; he cannot go and lease it to somebody else. He is losing money. For that reason, many lessors don’t want to lease to our airlines any more. It made leasing and access to aircraft very difficult for Nigerian operators to be able to lease aircraft. What it has done is to create a capacity problem in the sense that in a situation where an operator ordinarily should have six aircraft, he can only have two.”
Gbem, a lawyer said the lack of trust for operators by lessors had led to the shrinking of aircraft in the fleet of 11 airlines to less than 50 aeroplanes with some having two or three aircraft because they find it extremely difficult to meet the conditions set by lessors.
The situation she further said has led to high fares and delays at the airports with some spanning three to six-hour delays which are brought about by a shortage of aircraft.
“It leads to incapacity, reduces capacity to the airline and the public suffers for it and they lose money, lose time. Those are the economic issues and that one has been going on for so long behind the scenes. Nigeria did not have a good reputation as far as the Cape Town Convention was concerned. When you go as an operator, they will do due diligence and the name of Nigeria pops up that the aircraft leased to them did not return and they will decline to lease aircraft to them.”
“They will tell you that if you want to lease, come and pay $600, 000 instead of $300, 000 and that puts more operational costs on our operators. So, what happened last week was very significant with Nigeria’s committing that they comply with the timeline in the Convention for if there is a default even if somebody rushes to court, the court will say what the convention says. That way, those who want to lease their aircraft are assured guarantee that I can lease my aircraft to Nigerian operators and get it back.”
“The Minister has been working on it for a very long time. Being a lawyer, he quickly understood all these issues and has tackled them headlong. He has been to Boeing and other aircraft manufacturing companies and had engagements with Boeing, and Airbus.
“Sometimes he visited and people were running all kinds of commentary because they did not understand it and what he has been working on since he came onboard. We are very happy that by doing that, we are getting the High Court to get involved in it.”
Last line
The signing of the document was significant progress for Nigeria’s aviation sector and the economy in general. Investors can bring their aircraft into Nigeria and if there is any problem, such aircraft would be recovered within the 10-day period that Nigeria and the Cape Town Convention have provided.
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