"$60 Million Required": Regulatory Requirements, Others Threaten New Airlines' Operation in Nigeria

"$60 Million Required": Regulatory Requirements, Others Threaten New Airlines' Operation in Nigeria

  • Numerous airlines are waiting to see the turnout of events before they can dabble into Nigerian business
  • Some of the airlines have already applied to the Ministry of Aviation and Aerospace Development for their licences
  • Industry stakeholders said that several macroeconomic factors make it unfavourable to enter the aviation industry

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Many airline owners, who have applied for the processing of their Air Transport License (ATL) or Air Operators' Certificate (AOC), are now pausing their plans.

They prefer to wait and observe the state of the economy before making any further decisions.

Legit.ng understands that the applications were made to the Ministry of Aviation and Aerospace Development and the Nigerian Civil Aviation Authority (NCAA).

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Nigerian regulatory requirement, others threatens new airline operations
Stakeholders said many current operators might go out of business if FG enforces its six-airline fleet policy. Photo Credit: FG, NurPhoto
Source: Getty Images

According to a The Nation report, the emergence of new local carriers in the air travel ecosystem is threatened by economic uncertainty brought on by growing costs, changing regulatory policies, challenges obtaining rising foreign exchange, and other market dynamics.

Recent policies and changes

A new policy, enforced by the Nigerian Civil Aviation Authority (NCAA), requires that every airline operator in Nigeria must have a minimum of six aircraft in their fleet by January 2025.

According to this policy, four out of the six aircraft must be in an airworthy condition, while the remaining two may be undergoing maintenance or designated as aircraft on the ground (AOG), meaning they are not currently flying schedules.

Stakeholders in the industry have opined that if the NCAA follows through on its intentions to enforce the six-aircraft fleet policy, many of the current operators might go out of business because they have already depleted their fleets.

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Furthermore, worries regarding currency rates, which have seen the dollar convert from more than $1 to more than N1,500, are altering operators' estimates of the cost of an aeroplane.

Investors reconsidering options

The report stated that a few airlines that had halted operations a few years prior were considering their options in light of the strict requirements of renewing their Air Operators' Certificates.

Dr. Oludare Akande, chairman of the recently established Bellagio Airline Limited, suggested that the regulatory agency lessen the challenging operating environment that makes it harder for carriers to exist as the aviation industry is fraught with dangers and uncertainties.

He criticised the NCAA's fleet concept, which called for six aircraft, claiming that this would put a barrier in the way of potential competitors.

Operators may go out of business

According to The Nation's investigations, certain carriers might not possess the financial capacity to purchase an aircraft for $10 million each, given the current state of wet leasing.

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As a result, the carriers might be planning to abandon the air travel market since purchasing six planes would cost more than $60 million.

Spokesperson of the umbrella body of indigenous carriers, Airline Operators of Nigeria (AON), Prof. Obiora Okonkwo, declared that its members faced existential threats ranging from scarcity of Forex and the difficulty in acquiring aircraft due to country risk.

Besides these challenges, he said aircraft due for maintenance have been grounded and cannot be ferried overseas because of the scarcity of Forex.

He said there is a continuous depletion of airplanes in their fleet without replenishment, warning that the country may not have operating aircraft for domestic services if this continues.

Okonkwo said airlines need urgent Federal Government intervention, without which many carriers would go under, with the government becoming the undertaker.

He pointed out that the lack of stability in foreign exchange and the soaring price of aviation have eroded their ability to plan and have created uncertainty in the airline business.

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Earlier, Lgit.ng reported that Air Peace, Max Air, Aero and others may shut down over the naira devaluation.

New airline commences flights in Nigeria

Legit.ng reported that NG Eagle Airline has recently launched its services, marking a significant advancement for the Nigerian aviation industry.

The commencement of the airline's operations, as revealed in a statement by its Managing Director, Capt. A.E. Dare aims to enhance connectivity and convenience for travellers.

He added that the airline hopes to address the gap in domestic travel by offering cost-effective fares and providing passengers with high-quality services.

Source: Legit.ng

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