Airline Operators Seek FG’s Intervention over Bank Charges

Chinedu Eze

Airline operators in Nigeria have called on the federal government to introduce a policy that will enable banks charge single digit interest rate on airlines for aircraft acquisition and running costs.

This, according to the operators has become necessary in order to save Nigerian airlines from going under.

Managing Director of Arik Air, Chris Ndulue said that the biggest challenge of running airline business in Nigeria is the high interest rate charged by banks for credit facilities.

He remarked that there must be a different arrangement for airlines because they operate with very low margin profits and loans ought to be long term to enable them (airlines) pay bank without rocking their finances.

“The biggest challenge of doing business in Nigeria is the high cost of securing credit facility and for a capital intensive industry like aviation, you have to invest a lot of money as equity as an investor and you also have to borrow a lot of money in order to be able to do the business. High cost of fund is a big issue and coupled with the fact that a lot of aircraft components and services are imported. And over the years the trend we have seen is that the naira is constantly dwindling which eventually is a downward trend and that is why it is difficult for other airlines in the past to survive, it was not that they were not determined to survive,” Ndulue said.

Nigerian airlines have very short life span of about 10 years. According to the CEO of Belujane Konsult, Chris Aligbe, research conducted by Captain Mohammed Joji reveals that from 1983 to date, 49 airlines have collapsed. That is on the average of one and half per year.

In a letter to the Presidentelect, General Muhammed Buhari, Airline Operators of Nigeria (AON) had urged him to direct the Central Bank of Nigeria to lower the exchange rate for the airlines.

Speaking on the issue, Managing Director of new indigenous airline, Discovery Airways, Abdusallami Muhammed said an upcoming airline in other parts of the world lease aircraft from international financiers and therefore does not spend huge resources on aircraft acquisition.

“It is very hard to operate an airline in this part of the world. If you are in Europe or you are in America and you want to set up an airline, there will be finance companies that will be willing to lease aeroplanes to you. “Most of these airlines do not buy airplanes with cash; they lease them. Big aeroplane owners are leasing companies. But unfortunately in Nigeria because we have had over the years a bad reputation that we don’t pay our bills, you find out that these leasing companies are reluctant to lease aeroplanes to Nigerian operators.