Written by WOLE SHADARE AND FAITH OPARUGO
Spends N1.30tr in seven years on executive jets • Govt plans fresh intervention fund for airlines
WITH Nigeria holding the record of a country with the highest private jet ownership in Africa, the aviation sector has brought into sharp relief the paradox of a nation that is endowed with huge oil resources but where only a few are wealthy.
In a country where the average Nigerian lives on less than $1 a day, there is a super rich class of business moguls, bankers, preachers, politicians and oil magnates whose private ownership of jets is more than that of any other country.
While the rich can afford such luxuries, the economic crisis in the nation is seen in a situation where the aviation sector needs financial succour from the Federal Government.
Indeed, worried about the critical state of the nation’s aviation industry, the Federal Government is proposing a fresh round of intervention for airlines.
The new intervention fund would be different from the N100 billion given to airlines three years ago to help them boost their operations.
While some judiciously used the funds, others reportedly diverted them.
Also, government has ensured that access to the funds from the Central Bank of Nigeria (CBN) would be on the basis of a single digit interest and it is for a long term.
A top official of the Nigerian Civil Aviation Authority (NCAA) told The Guardian that the ownership of the state-of-the-art jets in Nigeria had grown to over 200 in 2012 from 50 in 2008.
Governor Rotimi Amaechi of Rivers State had on October 7, 2012 acquired a brand new Bombardier Global 5000 (N565RS) for his exclusive use. He is said to glide all over Rivers State while holding the throttle levers himself.
The jet was primarily bought from Bombardier in Canada for $45.7 million through the Bank of Utah Trustee account.
Sources said Amaechi traded off the state’s current Embraer Legacy 600, saying it was too expensive to maintain. The sources said $5 million was added to the proceed of the traded plane that enabled the government to buy the latest airplane.
The oil-rich Rivers State already owns an AW139 helicopter, which it leased to a commercial airliner. The state then turned around to patronize the airline’s VIP Sikorsky S76C helicopter.
Last year, the state government sold its Dash 8-Q200 aircraft to Cross River State for $6 million. Cross River State then leased the plane to Aero Contractors to undertake commercial flights to and from Obudu airstrip in the state.
Amaechi is just one of many state chief executives that own airplanes.
Aircraft manufacturers like Bombardier, Gulf Stream, Embraer, Hawker Siddley and Challenger have made Nigeria their huge market because of the demand for these aircraft types by wealthy Nigerians.
The common brands of private jets in Nigeria are Hawker Siddley 125-800 and 900XP, Gulfstream 450, 550 and 650; Bombardier Challenger 604, 605; Global Express; Embraer Legacy and Falcons.
According to an official of Bombardier, the Canadian aircraft manufacturer, Nigeria ranks behind the United States, United Kingdom, and China among countries that top their orders for the supply of the aircraft type; just as there are indications that N1.30 trillion may have been expended in the last seven years. Nigeria is said to top the market for private jet ownership.
The Managing Director of Aero Airlines, Captain Akin George, had recently spoken on the increasing number of private jets being parked at most of the aprons of Nigerian airports.
He was particularly piqued that most of the private jets carry foreign registration credentials rather than Nigerian registration.
The decision to register the jets in foreign countries, particularly in South Africa, is said to be informed by the notion that in case the owners want to resell the jets, they would warrant a bigger value from buyers.
He had subsequently called on the authorities concerned in the country to make registration processes in Nigeria friendly and attractive.
The economic downturn in Europe and the United States had made Nigeria and China to become two of the fastest growing private jet markets in the world.
There are many factors that have encouraged the rise of acquisition of customized jets, which cost between N2.4 billion and N9 billion.
Chief among these is the fact that flight schedules in the aviation industry are no longer flexible.
Again, the dearth of aircraft and the huge passenger traffic that is not commensurate with the capacity of the airlines has made air travel difficult for those who wish to travel by air.
In a situation like this, wealthy Nigerians would opt to acquire their own private jets to save time that would have been wasted waiting for flights whose times of departure are not known.
According to Aviation and travel expert, Olumide Ohunayo, the flight schedules of most commercial airliners that are not flexible have made it attractive for those who can afford private jets to acquire them.
Recurring delays and an inherent socio-political and economic system that thrive more in spontaneity rather than rigorous planning, according to Ohunayo, are other contributory factors.
His words: “Worldwide, they are taxed and made to pay higher charges to fund the civil aviation system and to reduce congestion, but that is not the case here.”
The new intervention fund of the Federal Government for the aviation sector is about a 16-year facility, which is expected to boost domestic aircraft operations.
This time around, the fund whose exact amount is yet to be disclosed would be paid to aircraft manufacturers or lessors for airlines to acquire newer fleet.
Aviation Minister, Stella Oduah-Ogiewonyi made the disclosure in Abuja at the weekend in an exclusive interview with The Guardian.
She said the intervention fund given to the carriers did not grow aviation, adding that, “we wanted a direct growth for a better impact than what we currently have in place and our strategy to utilising it is to have a tripartite, triangular if you like, system where the CBN with the approval of the Ministry of Finance pays directly to aircraft manufacturers of the leasing company.
“The leasing company would in turn bring the aircraft to our airline operators. The airline operators would now have access to brand new aircraft. If not brand new, but relatively brand new aircraft. You and the passengers will have access to functional airline that can take you to where you want to go safely and aviation remains the preferred mode of transportation,” she added.
She explained that a thorough audit of the airlines was carried out when she assumed office, stressing that there were airlines which were half-dead, financially weak, ineffective, inefficient and predicted that they (airlines) would collapse in six months because of their poor standards.
Airlines in Nigeria have shown signs of ailment, as all of them are heavily indebted to banks, aviation agencies, fuel marketers to the tune of over N250 billion.
Piqued by the development, the apex bank in September sent a circular banning financial institutions from extending further credit to Nigerian airlines.
According to the CBN, this will prevent the airlines from further escalating their huge debt profiles by borrowing more money.
Unlike in Nigeria, the United States gives bankruptcy protection like the chapter 11 protection, just as stakeholders call for more support for the carriers.
They noted that the domino effect of a crisis-ridden sector would lead to pain for operators and passengers
Oduah-Ogiemonyi regretted that Nigeria- airlines were yet to benefit from the Bilateral Air Services Agreement (BASA) with other nations.
The minister stated that for the country to tap into the air pact, the government would go into Joint Venture (JV) with airlines it has BASA pact with.
Nigeria has 85 BASA agreements that are completely unutilised and could not be utilised because none of the nation’s carriers has the capacity to reciprocate or operate into destinations as provided for in the air agreement, as they are very small and fragmented.
Her words: “We are not getting the commercial benefits. We have not been benefiting commercially from the relationships and we say we can do that. Now is the time to look at them so that we can empower them. We have viable routes that we cannot utilise because we lack the capacity.
“We proposed to have a marriage, a joint venture between the bigger airlines and us. In doing so, airline operators were given the opportunity to work with the big ones and the big ones will domesticate their activities as it applies to Nigeria; meaning they will do the Nigerian route and still have access to our international route.
“You can see the opportunity we are giving them access to, which ordinarily on their own, they would not have direct access to. For instance, they can do Nigeria-London; they can do Nigeria-New York and Nigeria-Dubai.”