The Nigeria Civil Aviation Authority (NCAA), has highlighted the hurdles faced by Nigerian airlines in turning a profit.
Speaking to reporters in Abuja over the weekend, NCAA Director General, Captain Musa Nuhu, said these challenges stem from the demanding operational environment, marked by tough access to funding.
He noted that some of these airlines are currently grappling with financial distress.
“Nigerian airlines are operating in a very difficult environment. An airline cannot operate in isolation of the economy it is operating in and the Nigerian economy is in very difficult times. The cost of financing is 25% (interest rate); that is killing to start with.
“You take a loan and you pay 25% of whatever you make to the bank. You are not talking about your expenses, your costs, your current and long-term liabilities.
“Quite a few of them are in financial difficulties and some are okay. So that is the way it is. It is a very difficult environment for the airlines and we also sincerely sympathize with them and we will try and see where we have flexibility to make life easy for them.”
However, the NCAA boss debunked claims in some quarters that the Ministry of Aviation was interfering in its affairs in a way that erodes its regulatory autonomy.
Speaking further, Nuhu stated that Nigerian airlines pay high insurance premiums compared to their counterparts in other parts of the world.
According to him, these expenses are severely affecting their operating funds. In response, the regulatory agency is assisting them by allowing modifications to insurance payment schedules, ensuring their survival.
“Like the issue of insurance, the insurance is from Lloyds of London while it requires a huge amount of foreign exchange. Normally, insurance they say, is for one year, but we know an airline that has 20, or 30 aircraft like Air Peace, to pay insurance for all the aircraft in one year will be difficult; that is why we say ‘pay quarterly,’ at least to reduce the financial burden, especially on the requirement of getting foreign exchange at a time.
“So, we try to assist the airlines in that area, and for those who have debts, we reach an agreement with them. If I have one billion with you, I am not asking you to pay that one billion to me, because if I do that, I am going to kill your business.
“So, we reach a Memorandum of Understanding (MoU) and they pay an amount that will not cripple their operation. But also, they have to pay a reasonable amount to clear those outstanding debts. Those are the areas we have flexibility with the airlines,” he added.
He stressed the collaborative efforts of his agency and the Ministry of Aviation and Aerospace Development in aiding airlines.