BUSINESS Smooth flight for Afreximport aircraft acquisition
In a strategic move to simplify aircraft acquisition by local carriers in Nigeria and other African countries, the African Import-Export Bank (Afreximbank) and the Russian Export Center (REC) have entered into a pact to bring Russian aircraft to Nigeria.
Russian aircraft have not operated in the Nigerian airspace in over 90 years of the country’s aviation. In Nigeria, industry players, stakeholders and members of the public easily identify with US brands like Boeing, Airbus, Bombardier, Embraer, among others.
However, more often than not, Nigerian carriers have wobbled over inadequate fleet capacity, resulting in stunted and skeletal operations. It was recently revealed that all the eight Nigerian carriers put together have 40 registered aircraft which are not up to the fleet size of Kenya Airways alone not to talk of the biggest carrier in Africa, Ethiopian Airlines.
But airline operators have blamed their travails on the operating environment which has made access to easy loans virtually impossible.
Capt. Nogie Meggison, Chairman of Airline Operators of Nigeria (AON), said Nigerian carriers borrow at 26 percent from banks to acquire aircraft, insisting nothing meaningful can happen in such an environment. He said such a borrowing portfolio makes aviation “a dead-on-arrival” business.
But the introduction of Russian aircraft being facilitated by Afreximbank is seen as a relief and an enabler for the desired growth and development of aviation business in Nigeria.
During the week, Afreximbank, the reputable trade finance bank in Africa, came to Nigeria with officials of the Russian Export Centre to showcase the Russian aircraft and discuss acquisition plans with Nigerian operators.
Airline operators like Dana Air, Air Peace, Caverton, among others, were at the Murtala Muhammed International Airport (MMIA), Lagos to see the aircraft and even negotiate acquisition.
Afreximbank’s involvement in the deal is not only to provide guarantee for the airlines in acquiring the Russian aircraft, it will also make the acquisition seamless and cheaper. At a time Nigeria is on the verge of bringing back the national carrier, the deal has opened a window of opportunity for the government to look at the acquisition option.
“Our partnership with the Russian Export Centre gives key players in Africa’s aviation industry tremendous opportunities. The 17-year average fleet age of African airlines is the oldest of any region, and by showcasing state-of-the-art and more fuel-efficient aircraft and the newest helicopters together with our expertise and experience in aircraft finance, we can enable the upgrade of Africa’s aviation industry. This upgrade is a key element in boosting economies and many industry sectors. We look forward to conversations with authorities and the aviation industry to discuss their development plans and identify areas where they require funding and technical assistance,” said Rene Awambeng, Afreximbank’s Global Head for Client Relations.
The aircraft showcased at the road show in Lagos included the Sukhoi Superjet (SSJ100) and MC-21. The SSJ is a 100-seater airliner which according to Awambeng has incredible fuel and environmental efficiency.
Awambeng explains that Afreximbank would interface with aviation authorities in Nigeria towards certifying Russian aircraft to operate on Nigerian soil, stressing that the seamless acquisition process with Afreximbank providing the credit guarantee makes it the best option for airline operators in Nigeria to increase their fleet with the newest and more environmentally standard aircraft.
“This (the aircraft) is a blend of Italian, French and Russian technologies, it is very spacious. They are for regional routes. They can take up to 100 passengers in different configurations of business class and economy. The aircraft are quick in take-off and landing, which means they can service short distances. These are brand new aircraft”, he said.
Awanbeng added, “We have entered into a strategic partnership with the Russian Export Centre, which is the export bank of the Russian federation to promote aviation in Africa, so that we can meet one of our strategic objectives. The Russians have invested significant amount in research and development in their aircraft which are very efficient in terms of fuel consumption which are ecologically very friendly.
“We have partnered with the Russian Export Centre to provide financing solutions so that African entrepreneurs, either private sector, national airline or private sector operators of airline companies can acquire these aircraft through assets structure or lease finance structures to meet our objective of moving people from one part of the country to another.”
The chairman of AON enthused that Afreximbank’s partnership with the Russian aircraft manufacturers had opened a new window of wider opportunities for operators to acquire the brand new aircraft with a less burdensome financing structure.
He said, “With Afrexim Bank coming into the picture to guarantee and finance it, it opens window, a new door and a new chapter for us into acquisition of brand new aircraft.
“Our problem in Nigeria as carriers is our financial structure and access to markets. You cannot finance an aircraft like this using 26 percent from Nigerian banks. It is a dead-on -arrival business. With Afrexim Bank coming in now, instead of taking a $7m or $5m to go and buy a 737-400 aircraft, to lease this aircraft like what American airlines, British airlines, Singapore and Emirates do, they are going to ask you for a 10 to 15 percent deposit of the actual value of the aircraft.
“For example, if this aircraft is about $25m, 10 per cent of that is $250,000, even if you are asked to pay 15 per cent, that is better compared to the $7m you are going to put down. So you can see your cash flow immediately gets better and you have disposable income to take shock. So you can afford to pay a six months lease or put a deposit of 10 percent and still have cash in your pocket. So instead of you buying a 10-15 year-old aircraft, you only need 10 per cent of that money. So the money for two aircraft now can almost give you 10 compared to buying 10 in cash. Now it changes the whole aviation business in Nigeria”.
While the operators agree that the aircraft are up to the standard that the Nigerian flying public would admire, the maintenance, repair and overhaul (MRO) base is another issue that needs to be considered. At every 18 months or at most 22, aircraft are required to be ferried for a comprehensive check overseas. In recent times, a Nigerian carrier revived its C-check capacity for the maintenance of Boeing classics but there are no facilities for the maintenance of the Russian aircraft. Stakeholders are now calling for the establishment of a maintenance base in the country to go hand-in-hand with the introduction of the Russian machines.
Meggison said, “The spare and the maintenance is where we have come to. I think that should be the beginning. Before now to start, you buy airplanes first, you now start to look for engineers to fix it. That is the wrong way and that is what has caused a lot of epileptic life in our industry. Now we need to turn it around and put the maintenance base down first, then you get the skilled labour before talking about the lease of the aircraft because a small thing as 1000 dollars to repair a machine of $30m can hold that aircraft for two months and you have cancelled schedules because nobody knows how to fix it”.
Also speaking with our correspondent, the Chief Operating Officer of Dana Air, Mr. Obi Mbanuzuo who was also on ground to assess the aircraft, said the outlook was very positive for Nigerian carriers, saying, “It eases a lot of burden on airline in terms of finance. The aircraft is very good. We had a very good discussion with the team yesterday. Specifically, this is a very good airplane. One of the things we discussed about was what kind of support they will give to airlines in Nigeria and they are very forthcoming. The outlook is very positive. It eases the burden on airlines in terms of financing and there are many packages”.
Sen. Hadi Sirika, Minister of State, Aviation
Capt. Nogie Meggison, Chairman, AON