Airline Operators Urge FG to Strengthen Policies, Regulations for Long Term Financing

Chinedu Eze

Airline operators have urged the federal government to institute policies and strengthen regulations that will make the aviation industry attractive to long term and single digit loans from financial institutions.

They also called on government to enact special portfolio arrangement to enable airlines that want to finance aircraft acquisition, to secure long term loans with lean interest rate from the Bank of Industry (BOI).

Speaking on behalf of  his members, a Trustee Member of Airline Operators of Nigeria (AON), Captain Roland Iyayi, told THISDAY that despite the seeming new interest Nigerian banks are having in the aviation industry, the banks do not like long term financing of projects or investing in a project that will require long term amortisation.

According to him, this explains why they do not like investing hugely in the aviation industry.

“What I feel is that Nigerian banks have appetite to finance retail rather than long term investment. Nigerian banks like short term funding structure better than long term arrangement of five to 10 years. But government is building confidence in the system but we cannot applaud them yet,” he said.

The operators noted that airline business remained capital intensive and that in many countries government gave different kinds of funding incentives to encourage banks to lend long term loans to airlines with single digit interest rates.

The federal government, led by President Bola Ahmed Tinubu has carried out actions and enacted laws to enhance leasing of aircraft by Nigerian carriers, which hitherto insisted only on wet lease.

This is expected to encourage Nigerian banks to show more commitment in the aviation industry.

But the Managing Director and CEO of Aero Contractors, Captain Ado Sanusi, told THISDAY that what the federal government is doing to expedite the trust of the lessors was good. He however said the lessors could also think that if the current government leaves office, the next government may not attune itself to the commitments of the previous government.

“So, government should pay more attention to policies and regulations that will strengthen the industry because if the institutions are right, lessors will be more comfortable that there will be a strong system in place for the long term to recover their equipment if disagreement arises. In doing so, you organically grow the trust, instead of expediting growth of the trust. Government should put more effort in making sure that policies and regulations guiding the industry are strengthened,” Sanusi said.

According to him, it is this system that will encourage banks to play stronger in the industry but frowned at the current situation were banks give loans to airlines at the rate of 23 to 30 per cent, saying that it will be difficult for Nigerian carriers to survive under such funding.

He also said it could be difficult even when an airline secures credit from international financiers, since the airline will be servicing the loan in dollars while it earns revenue in naira, positing that it will be difficult for the airlines to survive under such situation.

“Government can have another policy that will give airlines access to long term loans with lean interest from the Bank of Industry, especially for aircraft financing. This is what many other countries are doing to support their airlines, knowing the critical role air transport play in enhancing any nation’s economy,” he said.

However, the Executive Director, Fidelity Bank, Stanley Amuchie, said banks have picked renewed interest in the sector.

Amuchie said Fidelity Bank has signed strategic partnership deal with Frankfurt-based Aircraft Finance Germany (AFG) to streamline aircraft leasing and acquisition.

“I just mentioned what we are doing. We are just trying to improve aviation financing and leasing. AFG is very big in financing aircraft, sourcing aircraft, and leasing aircraft. We decided to enter into a partnership. We are already doing a lot in Nigeria today. We are financing most of the airlines, the big ones in Nigeria.

“We’re just finding another platform to improve on what we are doing already. The arrangement is for us to find finance, bring finance and expertise together to make sure that we finance aviation. The aviation industry is one industry you have to have the technical know-how to get into. So, we’re bringing the technical know-how for AFG to our ability to finance,” he said.