8 June 2018

Nigeria: Aircraft Leasing Companies May Blacklist Nigeria

Nigerian airlines may find it difficult to lease aircraft from leasing companies (lessors) due to the failure of some Nigerian carriers to return the aircraft when they fail to abide by the terms of agreement, as enshrined in the Cape Town Convention, which Nigeria is signatory to.

The consequence is that some Nigerian airlines would have to ground their operations because they do not have their own aircraft but depend on leased aircraft. This will further reduce the number of aircraft in domestic operation, leading to high increase in air fares.

Also the airlines that own their own aircraft may not be able to lease engines when their equipment suffer engine failure due to bird strike or other factors, which means that such aircraft operations would be grounded, thus further reducing operational aircraft in the country.

According to Cape Town Convention Protocol, when an airline leases aircraft, the lessor should be assisted by the airline and the Civil Aviation Authority of that country to retrieve his aircraft if the airline (the lessee) fails to abide by the terms in which the aircraft was leased.

But some Nigerian airlines run to local court to raise ex parte motion to stop lessors from taking back their aircraft and according to industry sources, the Nigerian Civil Aviation Authority (NCAA) allegedly do not assist the lessor in accordance to the Cape Town Convention.

THISDAY learnt that some leasing companies like Air Cab have foreclosed leasing aircraft and engine to Nigerian airlines due to its experience with Nigerian airlines and recently it had severed leasing agreement with a Nigerian carrier, as another Nigerian airline seized its aircraft and used court decisions to frustrate it from taking back its equipment.

A former Director of Medview Airline, Lukeman Animaseun told THISDAY that Nigeria is not fully implementing the Cape Town Convention, which it is signatory to.

"Before you lease any aeroplane, NCAA will sign Cape Town Convention form, known as Idera, which obligates NCAA to comply when the lessor if he wants the lessee to return aircraft leased in the event the airline refused to pay for the lease or any other issue, but NCAA has refused to assist lessors take back their aircraft. If you fully abide by Cape Town Convention, no court can stop a lessor from taking back his aircraft and most of the time it is the lessee that do not keep to the agreement 98 per cent of the time.

"Take the case of a Nigerian airline that leased three aircraft but did not pay the lessors but grounded one aircraft and used it to repair the other one and when the lessor, Air Cab came to take back their aircraft he went to court. NCAA should have insisted that Air Cab takes its aircraft.

But a source from NCAA in quick reaction said that it cannot disobey the courts because the regulatory authority is law abiding.

"They (the airlines) are exploiting the legal system to renege on their agreement with lessors. We must have to obey court's decision. When people go to court for ex parte motion it is not supposed to last for long, but in this case it lasts from three to four years. But what we did was to de-register the aircraft so that the airline cannot operate with it and the aircraft despite the ex parte motion remains de-registered," the source said.

Animaseum said the consequences of Nigerian airlines reneging on such agreement is that leasing companies will not trust Nigerian airlines; few willing lessors that may agree to lease aircraft to Nigerian carriers will hike the price, insurance premium will increase and urged government to intervene as urgently as possible.

The CEO of Aero Contractors, Captain Ado Sanusi therefore warned, "If Nigeria does not stick to Cape Town Convention protocol when the owner of the aircraft decided to retrieve it but allow the use of local laws to hinder the retrieval, the lessors will quietly refuse to lease aircraft to Nigerian airlines. This will injure airline operation in Nigeria. We have default clause in the leasing agreement but the next action the airline takes matters."

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