Chief Operating Officer and Executive Director, United Nigeria Airlines , Mr Osita Okonkwo has said the establishment of specialist banks will not resolve the myriad of challenges in the aviation sector.
He said the creation of aviation desks in existing financial institutions will provide a window to consolidate intervention for indigenous carriers.
Okonkwo who disclosed this in an interview said calls for the setting up of an Aviation Bank by some stakeholders in the air transport sector is against the global trend.
He said in many developed countries, airlines access intervention from their governments without specialist banks.
Rather , Okonkwo canvassed the setting up of well capitalised leasing companies , which he said should be supported by both local and foreign investors.
Such a company, he said should enter into agreement with aircraft manufacturers to make it convenient for Nigerian carriers to procure aircraft either through the lease or direct purchase arrangement.
He explained that such a company packaged as intervention for the aviation sector would make it easy for airlines to consider the terms of payment for airplanes in either local currency or foreign currencies.
Okonkwo said many carriers across the globe were exploring the lease option for aircraft procurement.
He, however, disclosed that global aircraft lessors were wary to do business with Nigerian carriers because of the difficulty in securing foreign exchange for direct payment .
Besides, the scarcity and lack of access to foreign exchange, he said many aircraft lessors are avoiding Nigeria because of the statutory requirement for insurance cover, which the regulators insist should be innitiated in- country.
He said : ” Aircraft insurance in Nigeria is pushing away many lessors. They are wary of the high risk rating of Nigeria in that space. No insurance company has the capacity internally for a combined single limit for a big aircraft, which is hovering in the neighboourhood of $600 million. For that purpose, local carriers have to look at re- insurance to spread the risk.This development is having negative impact on lessors willing to transact business with local carriers. The lessors are looking at an arrangement for aircraft insurance that meets international requirements.”
Okonkwo further said : ” The problem in the Nigerian aviation sector is not agitation for the establishment of an Aviation Bank. Other sector, where government set up Bank for Infrastructure, Bank For Agriculture and the likes, what has been achieved. What is the level of their intervention. It is insignificant. Globally, airlines are exploring the leasing option.
“What we need in Nigeria is a leasing company that is sufficiently funded. Aside, airlines could take it to the next level by issuing corporate bonds when they are listed on the Stock Exchange.
” Even, government could secure funding for the airline industry by accessing capital from Pension Funds.”
On the challenges of funding and its impact on the aviation sector, Okonkwo said local carriers were experiencing double jeopardy as the scarcity and inability to secure forex is taking a huge toll on aircraft maintenance , procurement of spares and aircraft acquisiction.
He clarified : ” Having to wait for the long queue of relying on the Central Bank of Nigeria (CBN), for foreign exchange at the official rate or paying for it at whatever rate at the parallel market is affecting local carriers.
” Because of this challenge, many aircraft lessors and original equipment manufacturers (EOMs), are wary to do business with Nigerian carriers. They prefer direct transfer of funding through the airline’s account.”
He said many carriers were struggling with increasing operating costs as aviation fuel has spiralled to between N790 to N800 per litre as against N300 per litre about two years ago.
Okonkwo said many airline investors were subsidizing their operations with funds from other businesses .
He said : ” Such investors continue to inject funds to sustain the business. This is because, the viability of airline business is not based on competition on fares. Such a trend is not healthy for air transport business, because it does achieve any heroism.