Insurance Premium: Experts Fear Commercial Flights May be Grounded in Nigeria


Chinedu Eze

Nigerian airlines may be forced to stop operation if Lloyd’s carries out its threat to blacklist and downgrade Nigerian airlines over their inability to pay insurance premium.

The airlines are already beset by paucity and high price of aviation fuel, low passenger traffic as well inability to obtain foreign exchange to meet their aircraft and insurance obligations.

Industry operatives, who spoke to THISDAY on the development, said that it is becoming increasingly difficult to operate in Nigeria adding the threat by Lloyd’s could end schedule commercial operation in Nigeria.

According to some airline officials, no airline can operate aircraft without insurance so if Lloyd’s carries out its threat to blacklist Nigerian airlines, other insurance companies will do the same and the consequence is that any aircraft, which its insurance is due, would be grounded because it would not be renewed.

This, they noted, will further deplete the aircraft in the airlines fleet as a third of the number of operating aircraft in Nigeria air currently out of service due to the inability of the airlines to source for forex for their mandatory checks abroad.

Experts had projected that by March next year, if no action was taken to support airlines with the required foreign exchange, majority of the aircraft would be on Aircraft on Ground (AOG), a development that would ground Nigeria’s economy.

Already the airlines are underserving the domestic market and cannot meet passengers’ demand. These days, flight operations are characterised by flight delays and cancellations, even as flight ticket prices are now beyond the reach of average Nigerians.

Before the threat by Lloyd’s to stop insuring Nigerian aircraft due to the inability of the airlines to pay, the operators have been buying aviation fuel at about N240 per litre.

The operators described the high prices as outrageous, noting that the problem was exacerbated by the fact that the product is not readily available prompting the airlines to negotiate with marketers before they would be able to source for aviation fuel.

A senior official of a major Nigerian airline told THISDAY on Wednesday that the implication of Lloyd’s threat to downgrade and blacklist Nigerian airlines is that they would find it difficult to operate, especially outside the country.

The official said that the situation would put the airlines in a dilemma because local insurance companies cannot carry airline risks without international underwriters, which would also shun the airlines once they are downgraded by Lloyd’s.

“The lessors (companies that lease aircraft to airlines) will pull their airplanes or tell the operators to insure their aircraft directly with insurance companies overseas. This will not be possible because there must be a local content, which means that you must involve local insurance companies. Although we would like to develop our local insurance companies but as at now, they cannot carry the risks on their own without their foreign partners.

The official, who would not want his name in print, said other consequences would include the withdrawal of safety ratings by the International Civil Aviation Organisation (ICAO), the withdrawal of Foreign Countries Operational Permit by European countries, which means that Nigerian registered aircraft cannot operate to European destinations.

“If we are downgraded by Lloyd’s it will be the beginning of the end of Nigerian airlines. We are going to lose Part1, 29 permit, which enables us to fly to European destinations. We will lose the US Federal Aviation Administration (FAA) Category 1 safety rating. Nigeria will be like Congo that has been blacklisted by EU countries, the US and other parts of the world. No aircraft registered in Congo can operate to these countries. What it will mean is that Nigerian airlines cannot operate outside Africa,” the official said.

The Chairman of Airline Operators of Nigeria (AON) Captain Nogie Meggison in his reaction to the threat of Lloyd’s to downgrade Nigeria said: “Virtually 100% of the aircraft being operated in Nigeria are re-insured in the Lloyd’s market. Hence, Nigeria cannot afford to be blacklisted as a nation because this will have very grave and deleterious consequences, as the entire domestic airlines will shut down since airplanes can’t be operated without being insured.”