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High exchange rate threatens future of domestic airlines

By on January 2, 2016

Industry experts have said Nigerian airlines may face a harsher operating environment if the value of the naira continues to nose-dive as paucity of dollars drives up the exchange rate.

They explained that Nigerian airlines earn their revenue in naira and  besides buying fuel locally they do all other things including maintenance, purchase of aircraft parts, leasing, insurance, payment for training and  some technical personnel in foreign currency.

Consequently, the experts said  airlines  would face hard times as the naira continues to lose value,  a development they disclosed would  increase airlines’   cost of operations  by about 35 per cent.

According to them, with projections that the nation’s economy would face further downturn in 2016, airlines   might suffer lower patronage because many Nigerians who presently travel by air may prefer other  cheaper means of transport.

They contended since  some of the airlines may not have the resources to continue to maintain their aircraft, pay for leases, training, technical personnel and others, they may be  forced  to shop, while others may lay off workers and also disengage the services of some aircraft in their fleet.

However, a chief operating officer (COO) of one of the domestic carriers told THISDAY on Wednesday that whatever happens some airlines would continue to carry out their operations but obviously would continue to spend more money. He remarked that there might be temptation to defer maintenance date or training or acquisition of aircraft parts except when the aircraft cannot function until such parts are replaced.

“If an aircraft part needs to be changed you must have to change it before you operate the aircraft; otherwise it would be left as aircraft on ground (AOG). This is because once the aircraft part is bad you will no longer manage it,” he said.

The COO also said that the consequence of the high exchange rate is that many airlines would have to rest their aircraft that need parts replacement or any other major maintenance. He disclosed that recently an airline rested about  eight of its aircraft out of 13 and was operating with only five because it could not afford to pay for their checks.

He noted that by resting aircraft the airline would be losing a daily revenue of about N5 million and it would still have to pay for leases, insurance and the personnel, including pilots and engineers.

“So that would be a huge loss for such airlines and as airlines are known to operate literally on shoe-string in Nigeria, some of them may go under; unless government intervenes,” he said.

THISDAY gathered that there had been allegations in the industry that some airlines defer maintenance or replacement of aircraft parts. Earlier in the year the report was rife that a certain airline withdrew an arrangement to replace a landing gear when it was able to secure extension with the Nigerian Civil Aviation Authority (NCAA). And after it had invited a maintenance, overhaul and repair (MRO) organisation and reached a deal with the company. It terminated the deal and extended the date for replacement. But NCAA would always say it does not grant maintenance extensions, not after the Dana Air and Associated Airways aircraft accidents.

 

[ThisDay]