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Nigeria: How Lessors Rip-Off Nigerian Airlines With Exorbitant Rates

It has emerged that the Nigerian air travel market has become a huge windfall for leasing companies as they rake in millions of dollars from Nigerian airlines.

According to THISDAY investigation, after the lockdown in 2020, Nigerian operators suffered under capacity, as fewer aircraft seats were available for increasing passenger traffic.

The unfortunate development jerked up the airfares, such that by April 2021, tickets were going for N60, 000; N80, 000 for Economy, one hour flight.

Industry sources told THISDAY that since 2020, Nigerian airlines have leased about 17 aircraft, which boosted their capacity and enabled them to meet the high demand of the 2021 Christmas season.

However, it was learnt that airlines had to pay a prohibitive high rate of about $7 million a month.

It was learnt that lessors give out these aircraft to Nigerian carriers at high exorbitant rates, citing country risk; which industry observers argue could be the highest rates among countries that are not at war in the world.

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For instance, THISDAY learnt from informed source that a Nigerian airline leased a B737-700 for $494,000 a month for 1, 200 hours, about $3000 per hour for wet lease, which means that the lessor would provide aircraft, crew, maintenance insurance (ACMI) and which industry stakeholders described as outrageous.

In addition to this, the airline would still pay for security of the aircraft and crew, hotel accommodation and also provide funds for logistics.

Aviation experts told THISDAY that the leasing rate is high and stated that in Europe leasing on ACMI could go from $1, 800, $2, 200 to $2, 300 per hour.

They however noted that because Nigeria is designated as high risk, the rate could rise to as high as $3000 per hour.

Former Chief Executive Officer of Aero Contractors, Captain Ado Sanusi, remarked that there was a time Nigeria was blacklisted because airlines that took aircraft on lease did not allow lessors to repossess their equipment and this eroded the trust lessors have on Nigerian carriers.

According to him, "Lessors increased their lease rentals because of what they deemed country risk and when they say country risk they are referring to political interference in the regulation but without such interference the regulation is very clear.

"When lessors want to repossess their aircraft there is no need to go to court, the regulator and the judiciary should allow them to take their equipment, abiding by the rules of the international treaty of aircraft leasing, which is the Cape Town Convention."

Sanusi who is also the former Managing Director of the Nigerian Airspace Management Agency (NAMA) said Nigeria has to abide by international convention, which is one of the factors the lessors look at. He added that the other factors they consider are the company that is leasing the aircraft, "how strong it is, whether it is in receivership or it has strong goodwill, adding that a company that has government support may attract lower rates because it has stronger credit profile.

"The rates are not the same. Some are paying higher than others. IbomAir for example, may pay lower rate than a company under receivership, so the lease rates are different."

He also noted that some leasing companies may not give aircraft directly to some companies, except through facilitators or middle men that have strong goodwill an credibility.

"These facilitators can go and pay four months in advance for the aircraft. Then the lessor can lease the aircraft to the facilitator who will in turn hand over to the airline and collect his commission," Sanusi explained.

Speaking in the same vein, the Managing Director of Aero Contractors, Captain Abdullahi Mahmoud, told THISDAY that Lessors charge Nigeria higher because many of the leased aircraft come through third party who collects commission, thus making the cost higher, adding that the facilitator or middle man is a person the lessor can trust and would be willing to lease aircraft to him.

"But this is different in Europe or the US where leasing rates are lower. But lessors have had their fingers bitten in Nigeria by past airlines that use the courts to stop lessors from repossessing their aircraft when there is breach in the agreement between the airline and the lessor," he said.

In a presentation recently on aircraft leasing, titled, "Aircraft Lease in Nigeria: Addressing the Concerns of the Lessor," Aviation Expert, Olumide Oyinloye explained that the lessor often like to know if Nigeria has ratified any of the conventions bordering on aircraft transportation.

"Of paramount importance to the lessor are conventions that grant security on operation of the aircraft as well as repossession of the aircraft in the event that there is a default or termination of lease. Such conventions include the Chicago Convention of 1944 on International Civil Aviation, the 1948 Geneva Convention on the International Recognition of Rights in Aircraft, the 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircrafts and more particularly, the 2001 Cape Town Convention on the International Interest in Mobile Equipment and the associated protocols on matters specific to aircraft equipment," he explained.

He noted that not only would the lessor be interested on the ratification of these conventions and the associated protocols but the extent to which they have been enforced or made applicable in the jurisdiction, example, "the extent to which Nigeria has derogated from the Cape Town Convention and the associated Protocol."

Artmotion S.Africa

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