The Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Musa Nuhu, has linked the underperformance and other operational challenges facing Nigerian airlines to high interest rates on credit and unbearable y insurance premiums for aircraft.
Nuhu, was quoted by Nairametrics, an online medium, as saying during an interview that the impact of these high operational costs is making it very difficult for local airlines to compete with forien carriers in Europe and America, where loans are being accessed at single-digit interest rates and aircraft insurance premiums are considerably lower.
Noting that though high costs of doing business in the country is not peculiar to the aviation sector, the Director-General, however, assured that the aviation agencies would continue to do their best to support the airlines, including by ensuring flexibility in their operations.
According to him, as part of the NCAA’s efforts to ease the high cost burden on the operating airlines, the agency gave the airlines some respite of quarterly insurance premiums on aircraft, which ensured the insurance cover was adequate for the risk.
Nuhu explained that like the issue of insurance which is from Lloyds of London, the aviation agency helped the local carriers by allowing them to pay their insurance premiums on quarterly basis and not yearly in order to minimize the burden on the operating airlines, especially on the requirement of getting foreign exchange for such payment just once as normally required by insurers.
He said: “Nigerian airlines are operating in a very difficult environment. An airline cannot operate in isolation of the economy it is operating in and the Nigerian economy is in very difficult times. The cost of financing is 25 per cent. That is killing to start with. You take a loan, and you pay 25 per cent of whatever you make to the bank.
“You are not talking of your expenses, your cost, your current and long-term liabilities. Quite a few of them are in financial strait and some are okay. So, that is the way it is. It is a very difficult environment for the airlines, and we also do sincerely sympathise with them, we will try and see where we have flexibility to make life easy for them.
“Like the issue of insurance, the insurance is from Lloyds of London, which is from another country, while it requires a huge amount of foreign exchange. Normally, insurance they say is for one year, but we know an airline that has 20 to 30 aircraft like Air Peace for it to pay insurance is a huge task. That is why we say pay quarterly, at least to reduce the financial burden, especially on the requirement of getting foreign exchange at a time”, Nuhu added.
Similarly, he also pointed out that the aviation sector agency had also signed a Memorandum of Understanding (MoU) with some of the debtor-airlines on how they could repay their outstanding debts with ease without crippling their operations, adding that will enable the sector to contribute more to the nation’s GDP.
The industry expert maintained that for the Single African Air Transport Market (SAATM) to have the desired impact, African countries should learn from the European Union Aviation Safety Agency (EASA) by harmonising their regulations.