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Nigeria Air To Commence Operation Despite High Operational Costs

Aviation industry stakeholders are puzzled as to why the federal government authorized the lease of three aircraft for Nigeria Air, the national carrier, at a time when regional airlines are battling with high operational costs due to the fuel and foreign exchange crises.

Aside from taxes and fees, airlines must pay in dollars for spare parts, planes, and maintenance; this week, the black market exchange rate of the naira to the dollar fell to a record low of 710 to the dollar.

With the price of JetA1 growing from N200 per liter in December 2021 to above N400 per liter in February, the aviation fuel crisis, which started in late February and has gotten worse since then, is currently endangering the ability of airlines to maintain operations. In most places in Nigeria as of Tuesday, the price had soared to over N800 per liter.

Due to excessive operating costs, Dana Air and Aero Contractors, two significant domestic carriers, had to cease operations.

In light of this, stakeholders have expressed worries about the national carrier’s ability to operate financially in the domestic market and compete with other carriers that are struggling to stay in business.

Last Monday, the federal government gave its approval for Nigeria Air to lease three planes.

Airbus and Boeing are the two manufacturers of the three aircraft. The national carrier would start with domestic routes, according to the administration.

Aviation analyst Olumide Ohunayo told BusinessDay that Hadi Sirika’s idea of establishing Nigeria Air appeared to be more of a personal aspiration than a shared national goal.

Ohunayo claimed that despite all obstacles and clear difficulties, the minister persisted in pursuing the project out of desire.

They will compel this airline to launch, he said. When the current administration steps down, they will start to wind down and transfer the burden to Nigeria. I’m curious as to why the Federal Executive Council would permit a supposed independent airline with 5% government ownership to wet lease aircraft.

“Why would we begin with a wet lease of a Boeing and an Airbus aircraft? This is taking place as airlines are having trouble. We wish to rent such a pricey machinery. Having domestic airlines on international routes is the justification for having a national carrier. Even though the costs of operating will be extremely high, we are leasing airplanes.

Ohunayo argued that the project ought to be put on hold and that the timing was poor because there were no signs the carrier would survive.

We might not even attract legitimate investors at a time when the nation is experiencing an economic depression, he continued.

The idea to launch a national carrier at a time when the industry is dealing with issues that threaten airlines’ viability was called “a disaster” by Sindy Foster, principal managing partner of Avaero Capital Partners.

It is still possible to stop the catastrophe. Launching now would be extremely detrimental to the domestic aviation industry. Postponement is the appropriate course of action unless the goal is to completely destabilize the industry, Foster added.

She claimed that creating a national carrier now when there is more rivalry for precious aviation fuel and foreign exchange is not in the best interest of the sector.

READ MORE: Banks Raise Deposit Rates To 1.3%

They will undoubtedly receive preferential treatment because they can place large orders, according to Foster. How does that currently benefit the sector? They ought to concentrate on finding solutions. Something like this isn’t just launched and hoped for the best. To understand the effects of launching today, you should at the very least do an impact assessment.

“There might be some benefits, but what if the drawbacks outweigh the benefits? A prudent government would wait until launching would benefit the industry. If no other airline can compete with it for aviation fuel or foreign currency, forcing the other airlines to stop operating or raising their prices, no one will be impressed.

A wet lease aircraft will be used to launch the carrier, according to the federal government. The organization that owns the aircraft will therefore supply the aircraft, as well as the pilots, crew, and engineers.

There is no ideal time for a carrier to launch, according to Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School. He said he has no issues with the carrier joining at this time.

Mshelia asserts that having a national carrier has advantages because it gives the government the authority to act in ways that are just and equitable. However, if the planes were wet-leased, all the jobs would be lost, she claims.

He claimed that a government that takes pride in creating jobs shouldn’t be exporting those jobs.

“Second, the Nigeria Civil Aviation Authority law prohibits you from starting an airline with wet lease aircraft since a wet lease can only operate between two already existing operators with an Air Operating Certificate, he continued (AOC).

Why will the airline be wet leasing planes if they don’t yet have an AOC? The government shouldn’t be breaking the law since it is against the law. What example are they establishing if they do? It would be unjust and wrong if the government smoothly provided foreign currency to Nigeria Air but did not do the same for other carriers.

He emphasized that there should be a level playing field and that government carriers must do the same if other airlines are using the black market to obtain money.

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Aviation industry stakeholders are puzzled as to why the federal government authorized the lease of three aircraft for Nigeria Air, the national carrier, at a time when regional airlines are battling with high operational costs due to the fuel and foreign exchange crises.

Aside from taxes and fees, airlines must pay in dollars for spare parts, planes, and maintenance; this week, the black market exchange rate of the naira to the dollar fell to a record low of 710 to the dollar.

With the price of JetA1 growing from N200 per liter in December 2021 to above N400 per liter in February, the aviation fuel crisis, which started in late February and has gotten worse since then, is currently endangering the ability of airlines to maintain operations. In most places in Nigeria as of Tuesday, the price had soared to over N800 per liter.

Due to excessive operating costs, Dana Air and Aero Contractors, two significant domestic carriers, had to cease operations.

In light of this, stakeholders have expressed worries about the national carrier’s ability to operate financially in the domestic market and compete with other carriers that are struggling to stay in business.

Last Monday, the federal government gave its approval for Nigeria Air to lease three planes.

Airbus and Boeing are the two manufacturers of the three aircraft. The national carrier would start with domestic routes, according to the administration.

Aviation analyst Olumide Ohunayo told BusinessDay that Hadi Sirika’s idea of establishing Nigeria Air appeared to be more of a personal aspiration than a shared national goal.

Ohunayo claimed that despite all obstacles and clear difficulties, the minister persisted in pursuing the project out of desire.

They will compel this airline to launch, he said. When the current administration steps down, they will start to wind down and transfer the burden to Nigeria. I’m curious as to why the Federal Executive Council would permit a supposed independent airline with 5% government ownership to wet lease aircraft.

“Why would we begin with a wet lease of a Boeing and an Airbus aircraft? This is taking place as airlines are having trouble. We wish to rent such a pricey machinery. Having domestic airlines on international routes is the justification for having a national carrier. Even though the costs of operating will be extremely high, we are leasing airplanes.

Ohunayo argued that the project ought to be put on hold and that the timing was poor because there were no signs the carrier would survive.

We might not even attract legitimate investors at a time when the nation is experiencing an economic depression, he continued.

The idea to launch a national carrier at a time when the industry is dealing with issues that threaten airlines’ viability was called “a disaster” by Sindy Foster, principal managing partner of Avaero Capital Partners.

It is still possible to stop the catastrophe. Launching now would be extremely detrimental to the domestic aviation industry. Postponement is the appropriate course of action unless the goal is to completely destabilize the industry, Foster added.

She claimed that creating a national carrier now when there is more rivalry for precious aviation fuel and foreign exchange is not in the best interest of the sector.

READ MORE: Banks Raise Deposit Rates To 1.3%

They will undoubtedly receive preferential treatment because they can place large orders, according to Foster. How does that currently benefit the sector? They ought to concentrate on finding solutions. Something like this isn’t just launched and hoped for the best. To understand the effects of launching today, you should at the very least do an impact assessment.

“There might be some benefits, but what if the drawbacks outweigh the benefits? A prudent government would wait until launching would benefit the industry. If no other airline can compete with it for aviation fuel or foreign currency, forcing the other airlines to stop operating or raising their prices, no one will be impressed.

A wet lease aircraft will be used to launch the carrier, according to the federal government. The organization that owns the aircraft will therefore supply the aircraft, as well as the pilots, crew, and engineers.

There is no ideal time for a carrier to launch, according to Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School. He said he has no issues with the carrier joining at this time.

Mshelia asserts that having a national carrier has advantages because it gives the government the authority to act in ways that are just and equitable. However, if the planes were wet-leased, all the jobs would be lost, she claims.

He claimed that a government that takes pride in creating jobs shouldn’t be exporting those jobs.

“Second, the Nigeria Civil Aviation Authority law prohibits you from starting an airline with wet lease aircraft since a wet lease can only operate between two already existing operators with an Air Operating Certificate, he continued (AOC).

Why will the airline be wet leasing planes if they don’t yet have an AOC? The government shouldn’t be breaking the law since it is against the law. What example are they establishing if they do? It would be unjust and wrong if the government smoothly provided foreign currency to Nigeria Air but did not do the same for other carriers.

He emphasized that there should be a level playing field and that government carriers must do the same if other airlines are using the black market to obtain money.

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