Africa: Aviation aircraft lessors ripping off Nigeria airlines with high premium, while charging lower to carriers operating in less friendly environment

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Nigerian airline operators have been at the receiving end of aircraft lessors who used the term high risk area to charge higher premium for their aircraft. This, the Chief Operating Officer, Dana Air, Obi Mbanuzuo, says is unjust and unfair to the airlines in the sector.

According to a report published by thisdaylive.com, written by Chinedu Eze, Mbanuzuo has said that it is wrong for aircraft lessors and insurance companies to describe Nigeria as high risk environment and increase leasing costs and insurance premium for domestic carriers.

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Mbanuzuo told THISDAY in an exclusive interview that they use the term high risk for Nigeria to discriminate against the country because there are worse environments in the world where insurance premium and cost of leasing are relatively lower than in Nigeria.

According to him, lessors use such term to deny Nigerian carriers aircraft for leasing and forcing them to buy the aircraft, which many cannot, but because of the hue cost. He noted that many airlines in the world lease aircraft which makes it easy for them to operate, adding that comparatively lessors lease the aircraft to lessees in other environments at relatively cheaper rates.

He stated that because the Nigerian insurance sector cannot undertake huge risks because of their low capital outlay, international insurance firms rip off Nigerian airlines by describing Nigeria as high risk environment.

“Well, I do not believe that, Nigeria is not a high risk environment to me. It is something that they use to discriminate against is or because they think they can get more money from us. Our environment is not worse than somewhere in South America and other parts of the world,” Mbanuzuo said.

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He acknowledged that the reasons why they describe Nigeria as high risk is because most of its airfields have very poor landing aid when compared to what is in Europe where every landing aid is working 99.9 per cent most to the time but in Nigeria pilots fly through thunderstorm without working instrument landing system (ILS), very high omnidirectional radio range (VOR), noting that Nigerian airlines have been ingenuous over the years and have operated safely.

“When they say it is high risk, what is high risk there? If airplanes are falling down from the sky every day then we understand that. But I don’t see any of that. And this affects us in matters of insurance.

“Unfortunately our insurance companies here are not strong enough to underwrite a small airline like Dana Air. You have to go abroad and when you get there they bring out stories of risk, they double the price or triple the price of the premium because they know you can’t go anywhere. If I had a very, very strong Nigerian insurance company that could handle us, I will sit down and do it here,” he said.

Mbanuzuo commended efforts the Nigerian Civil Aviation Authority (NCAA) is making to see whether the lessors and insurance companies can review their rating on Nigeria but noted that the regulatory body can only guarantee Nigerian carriers but may not be able to influence them to end their discrimination of the Nigerian operators.

“I am sure you know that we said in 2021 in Dana Air that we are looking at adding more aircraft to our fleet. Part of the strategy was to lease aircraft; we are not looking to purchase.

Purchasing a new aircraft needs huge amount of money. One of our colleagues just purchased a new aircraft recently with the support from their bank.

“I applaud them but not everybody has that kind of support especially in this market where sometimes the finance houses want their returns within five years or so. So we are seriously looking at adding aircraft to our fleet but one thing we found out when we went to the aircraft market was that many of them were very, very happy with Dana Air, after we showed them our financial status and the operational side.

“Of course they are going to look at your passenger load factor, where you fly to, they were very happy when they looked at what we have, but there was something they all mentioned. They said Nigeria has leasing problem and it is not the NCAA that caused it.

“That there were previous concerns that requested for aircraft, got the equipment and after a while through one problem or another did not pay their leasing fees or return the aircraft as agreed. Yes, the market might be bad. Sometimes it could be because the dollars are not there. You know over two years ago we have been facing the problem of foreign exchange,” he said.

Mbanuzuo said the bad experience in the past made lessors to develop negative perception of Nigerian carriers, but noted that lessors have many aircraft parked and waiting to be leased.

“There are a lot of aircraft parked out there looking for lessees or buyers. So I am not sure if it is an NCAA problem, it is a country problem that we have to find a way to solve. We have had situations where the lessors come to take the equipment and the Nigerian party goes to court.

“The NCAA also is helpful but people go to court and come up with all sorts of injunction. So it is a complex problem and it affects all of us. But at Dana Air we don’t have a problem, we have only one aircraft on lease. They have seen our books and they are quite happy with us but it is very difficult to release aircraft to us because we are Nigerian carrier,” he said.

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