High Cost of Aircraft Insurance, Maintenance Threaten Domestic Airlines

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Chinedu Eze

Chairman of Air Peace Limited, Mr. Allen Onyema has warned that unless urgent action was taken to review downwards, the cost of aircraft insurance in Nigeria and the establishment of Maintenance, Overhaul and Repair (MRO) facility locally, domestic airlines would find it extremely difficult to continue to operate.

Onyema said besides the cost of aviation fuel, which constitutes over 40 percent of airline’s operational cost, insurance and aircraft maintenance erode the revenue of airlines.

He noted that insurers wrongly designate Nigeria as high risk environment and therefore multiply the cost of aircraft insurance, noting that with the low value of the naira it is exorbitant ferrying aircraft overseas for maintenance, so urgent establishment of MRO in Nigeria is needed to save the country billions of naira in foreign exchange.

The Air Peace Chairman made this known at the weekend in Lagos when he announced that the airline had acquired two new Boeing 737-500 aircraft as part of efforts to boost its fleet and route expansion programme.

He said the investments in the new aircraft had become necessary following the receipt of licences to commence regional flight operations.

“We have been designed to fly into these regional routes: Dakar, Senegal; Accra, Ghana, Niamey, Niger; Abidjan, Ivory Coast; and Duola and Cameroon. One of the new aircraft has the capacity to take 142 passengers, while the other can take 126 passengers. In our fleet, we have nine Boeing and one Dornier aircraft, which make us the second largest airline in Nigeria in terms of the number of aircraft. Some of the aircraft we will deploy for the regional routes. We have visited the civil aviation and relevant authorities in these countries and plans are at advanced state. We will soon announce our commencement dates on these routes but one thing that we want to assure our passengers is that we will put in our cockpit the best of pilots,” Onyema said.

He also disclosed that the airline had been designated to fly to destinations in China, Dubai, India, and South Africa. He said his company was ready to make the requisite investments to grow in the industry and create more jobs for Nigerians.

According to the Air Peace Chairman, at present, and in just two years, the airline had employed over 700 Nigerians. He however lamented the harsh operating environment in Nigeria saying airlines were finding it so difficult to survive as going concerns.

“The domestic airline industry is not getting the right support it deserves from the government as they would rather do everything possible to support foreign airlines. We do more for the country than the foreign airlines. If the foreign airlines face the kind of challenges that we face for 72 hours they will seize to exist. The government must rise up and protect local airlines, but I give kudos to the Minister of State for Aviation, Senator Hadi Sirika who shows understanding and who knows the enormous challenges we are facing” he added.

Onyema listed some of the challenges facing local airlines to include forex and fuel scarcity, high premium on insurance, double taxation to regulatory and airport agencies, as well as the failure of Nigerian Customs Services (NCS) to comply with the recent government directives that exempted imported aircraft spares from duties.

He said his airline lost over N260 million recently when Customs refused to release imported engine spares to the airline, thus forcing the grounding of that particular aircraft for weeks.

He also criticised some local airlines charging airfares as low as N12, 500 on some routes, noting that such fares were unrealistic and that airlines that charged such fares in an attempt to woo passengers and stay in the game, did so not minding that such undue or unfair competitive scheme could force them into breaching safety standard and jeopardise safety of the aircraft, the crew and the lives of passengers.