How lack of aircraft maintenance facilities cost Nigeria $2.5bn in 2021— PCL survey

Considering the benefits of the Single African Air Transport Market (SAATM), which has made Africa a massive market for intra-regional trade, major  Nigerian carriers have realized that there is a huge market to reach in the West and Central African area.

In the 2022 customer satisfaction survey report  on Nigeria’s aviation sector presented at an event titled: ‘’Aviation in Nigeria: What Next?’ By the managing director of Phillips Consulting Limited (PCL). Mr Rob Taiwo, the organization identified seven trends that shaped the country’s airline scene in the previous year.

Among the trends identified included the birth of United Nigeria Airlines, Green Africa Airways and Cally Air, while others like Cardinal Airline, Chanchangi Airline and the Nigerian Eagle airline which was stalled due to bureaucracy were  reportedly tipped  to commence operations.

According to the survey, within the period some  domestic airlines moved to expand their fleets and open routes to strategic regions worldwide while airlines  like Ibom Air  signed a deal with Airbus to buy 10 A220 jets just as Air Peace, Nigeria’s largest carrier reportedly fully paid for 13 new Embraer 195-E2 aircraft from the Embraer Facility in Sao Jose Dos Campos25

The federal government’s resolve to concession four international airports across the country also trended with the government attributing reasons for the concession its desire to fast-track infrastructure development and enhance operational efficiency and profitability.

While announcing the airports considered for concession to include the Muritala Muhammed International Airport (MMIA), Lagos; Nnamdi Azikiwe International Airport (NAIA), Abuja; Port Harcourt International Airport, Port Harcourt; Mallam Aminu Kano International Airport (MAKIA), Kano, the government added that the  concession of the airports will be structured as a Public Private Partnership (PPP) arrangement between the Government and the Private Sector.

Establishment of  aircraft Maintenance Repairs Overhaul, otherwise known as MRO was another major issue that trended.

The Nigerian Government had announced move to support the establishment of independent Maintenance, Repair and Overhaul facilities in Nigeria that will serve the maintenance demand in West and Central Africa and provide maintenance services for the National Carrier and African Leasing Company.

The MRO which will be established through Public Private Partnership (PPP) using the Build, Operate and Transfer model and will have the capacity to serve both Narrow Body (Jet $ Turboprop) and Wide Body aircraft maintenance requirements, will be located at either Murtala Muhammed International Airport, Lagos or Nnamdi Azikiwe International Airport Abuja.

Development of cargo/agro-allied airport terminals also became an issue with the government expressing its desire to support the development of dedicated Cargo/Agro-Allied Terminals and ancillary infrastructure to take advantage of the market.

These Cargo/Agro-allied terminals the government said will be in each of the country’s six geographical zones to support the movement of fresh agricultural produce by air, while the terminals will be established via the Design, Build, Finance, Operate and Maintain Public Private Partnership (PPP) model.

The proposed terminals will have facilities such as a dry Cargo Terminal Warehouse, Perishable Cargo Terminal with Cool Chain Storage, climate chambers for storage and handling of temperature-sensitive products such as fresh agricultural products, Pharmaceuticals; Bonded Warehouse; Transit Zone and free Port/Foreign Trade Zone; E.U. Border Post; Animal Quarantine; Fresh Meat Inspection; Livestock Handling etc.

Establishment of Aviation Leasing Company (ALC) also topped the trended issue. In the survey, PCL discovered how the top line of airline operators is continually pressured due to aircraft leasing on the back of high bank interest rates and foreign exchange rates with the  absence of a Leasing Company for airlines causing the Nigerian economy to lose more than $2 billion yearly.

The Aviation Leasing Company (ALC), also known as an African Leasing Company (ALC) would help to increase fleet size, solve the issue of aircraft leasing, and lower the excessive premium fees to airlines in Africa, the ALC is expected to offer leasing possibilities for Nigerian and regional airlines.

The establishment of  a national carrier,  the Nigeria Air which was earlier launched at the Farnborough Airshow in UK in 2018 also topped the charts.

This transaction is structured to be implemented under a Joint-Venture (JV) arrangement with the Federal Government holding a maximum of a 5% stake in the proposed entity, while the Strategic Equity Partners (SEP) will be expected to have a maximum of 49% stake which  ensures that the entity will have a minimum Nigerian shareholding of 51%.

Ethiopia Airlines has been  endorsed as the preferred bidder for Nigeria Air  under a public-private partnership model, with the African carrier having a 49% stake in the airline.

ET planned to kick-start with an initial capital of $300m.,  a contract for three Boeing 737-800s has been finalized with Ethiopian Airlines set to complete contract negotiation and compliance certificate issuance by mid-Nov-2022 before launching the carrier by the end of 2022.

The pressure the unavailability of foreign exchange and rising operational cost mounted on the airlines and the government also trended according to the survey.

The PCL in its finding cited how Nigerian airlines have been grappling with operating costs such as taxes, surcharges and maintenance costs, which have risen due to a shortage of foreign exchange.

This the survey said has “continued to affect the aviation industry, mainly due to the absence of an MRO facility in Nigeria. Expenditure on Maintenance, Repair and Overhaul was $2.5 billion in 2021.  Domestic airlines face difficulty accessing forex to acquire spare parts to maintain their aircraft. This is likely to influence the rate at which a grounded aircraft can be fixed and restored to its flight schedule, which could significantly impact the schedule reliability of domestic airlines”, the PCL survey identified.