At the FAAN National Aviation Conference (FNAC) held at Eko Hotel, Lagos, discussions on airline sustainability took centre stage during the panel session on “Airline Profitability and Cost Optimization,” where Fidelity Bank’s Managing Director and Chief Executive Officer, Dr. Nneka Onyeali-Ikpe, declared that only a dedicated aviation bank can provide the single-digit financing required for Nigerian airlines to survive and grow.
Onyeali-Ikpe, who was the first panelist engaged during the session, was commended for Fidelity Bank’s role in providing access to structured funding that has helped airlines, particularly new entrants, expand their operations. Responding to a question on whether Nigeria could realistically establish a specialized aviation bank, she explained that commercial banks are structurally unable to offer the kind of low-interest, long-tenor financing the sector demands.
According to her, the prevailing lending environment makes single-digit loans impossible for commercial banks, with the Monetary Policy Rate standing at 27 percent and depositors demanding interest rates of up to 20 percent. She stated that airlines, which require enormous capital outlay for aircraft and infrastructure, cannot thrive under such conditions, as they need 10 to 15 years or more to repay major loans.
She described the proposed aviation bank as “a dream come true” for the sector, noting that while commercial lenders would not profit as much from such an arrangement, it remains essential for national development and for the long-term stability of the airline industry. She added that even if established, the aviation bank would still rely on commercial banks to provide guarantees, similar to the existing model used by the Bank of Industry.
Onyeali-Ikpe recalled that Fidelity Bank “did the heavy lifting” years ago by financing airlines at a time when the sector was considered too risky, putting in place structures that later encouraged other banks to return to aviation financing. She said the bank’s support to airlines such as Air Peace and Ibom Air has yielded strong results without the setbacks that characterized earlier eras of high default rates.
When asked about alternative funding models such as aviation bonds, structured finance or intervention funds, she pointed to dry leasing as the most effective option currently available to Nigerian airlines. She said dry leasing has become a game changer for operators seeking to expand their fleets without the heavy financial burden of outright aircraft acquisition. She also praised the Minister of Aviation for defending Nigeria’s position during negotiations with international lessors, noting that he insisted the challenges confronting Nigerian operators were global rather than peculiar to the country.
The session concluded with an emphasis on the urgent need for low-cost, long-term funding to enable airlines to optimize costs and achieve profitability. Onyeali-Ikpe stressed that until an aviation bank is established or a comparable developmental financing model is fully implemented, Nigerian airlines will continue to struggle under the weight of high commercial lending rates.
