The future looks promising for domestic airlines in Nigeria as the government is taking steps to improve the country’s status with international aircraft leasing and Insurance companies. This will make it easier for domestic airlines to lease aircraft, a policy that has been challenging in the past. In a dry lease agreement, the lessor only offers the aircraft, leaving the lessee responsible for operating the plane with their own crew or through an independent means. No air carrier certificate is required for either party as long as the aircraft is not used to transport individuals or goods for payment.
Also, the dry lease option allows airlines to save costs by providing their own crew to operate the leased aircraft. In contrast, domestic airlines in the country often opt for wet leases. In a wet lease agreement, the lessor supplies the aircraft and crew while maintaining the authority over flight operations. Until recently, Nigerian airlines were able to lease modern aircraft, but due to some airlines not following the agreement, Nigeria gained a negative reputation with international lessors pulling out their services from Nigerian carriers.
Nigerian carriers faced increased insurance premiums.
Due to being blacklisted, numerous Nigerian airlines have no choice but to opt for wet leasing, resulting in high costs per hour. This is because they must pay foreign crew and cover aircraft maintenance, with the crew having the authority to return the aircraft to its owner if necessary. The failure of Nigeria to comply with the aircraft lease agreement led to the signing of the Cape Town Convention by the Nigeria Civil Aviation Authority (NCAA).
After Dr. Harold Demuren implemented the Cape Town Convention as DG NCAA, Nigerian airlines were no longer able to disrupt lessor companies’ operations by reclaiming leased aircraft in the event of a lease agreement breach. Nigerian carriers faced increased insurance premiums due to being blacklisted, with Nigeria being categorized as a high-risk country by foreign insurers. Minister Festus Keyamo has successfully engaged with an international advocacy group to clear Nigeria’s name from the blacklist, opening up new dry lease opportunities for the country in Aviation and aerospace development.
Removing the threat of dry leasing aircraft in Nig. would be beneficial.
More so, negotiations are underway between the Minister and the Aircraft Leasing Group (ALG), which includes industry giants Airbus and Boeing, along with other members. During the celebration of the third anniversary of the United Nigeria Airlines on February 19, 2024, Mr. Osita Obiorah, the Chief Operating Officer (COO), assured reporters that the Minister is fully aware of the progress. Removing the threat of dry leasing aircraft in Nigeria would be beneficial for the nation.
Their operations are negatively impacted by the risk rating of the country, which has led them to resort to costly wet leasing options. They also urged against missing out on opportunities, especially in Nigeria, which is recognised as the biggest market on the African continent with immense potential due to its size. Obiorah expressed his concern over the increasing price of jet fuel, currently at ₦1300 per litre, and the difficulty in accessing foreign exchange.
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He described these conditions as potentially disastrous for airlines but acknowledged their ability to survive so far as miraculous. The airline’s Chief Operating Officer mentioned that the Airline was considering formalizing interline agreements with other carriers due to the impact of insufficient Infrastructure on airline operations. The COO noted that while the airline currently has informal arrangements with Dana, Air Peace, NG Eagle, and Aero Contractors to help transport passengers when needed, they are now looking to establish more official partnerships.