Dilema as ageing aircraft eat up operators margins
by IFEOMA OKEKE
September 22, 2017 | 12:22 am| | | Start Conversation
Domestic airlines operating in Nigeria are continuing their struggle with high cost of aircraft maintenance and aviation fuel (JET A1) as a result of the predominance of ageing aircraft.
Aviation sector experts say that aside from the absence of aircraft maintenance facilities in Nigeria and high exchange rate of the dollar to the naira, ageing aircraft pose a contributory factor to high cost of aircraft maintenance.
“There is empirical evidence that suggests that there is up to 30% difference in maintenance cost between new and old aircraft. Newer aircraft are more fuel efficient than older ones. The older an aircraft gets, the more intensive maintenance is required and therefore, the more expensive it becomes to keep them airworthy,” Obi Mbanuzuo, the accountable manager of Dana Air, told BusinessDay.
Mbanuzuo, explained that domestic airlines use older airplanes because of financing. “Due to the inability of banks and lending houses to provide long term loans required to acquire newer aircraft, local airlines go for cheaper, used versions, which they can finance themselves, without the help of banks. For example, a brand new Boeing737-800 costs up to $90 million and western airlines pay this over between 10 and 15 years, with the help of leasing and finance facilities which are unavailable in Nigeria. Conversely, a used B737-300 costs about $4 million.”
Dung Pam, Nigeria Aviation Safety Initiative (NASI) coordinator, told BusinessDay that since fuel costs represent between 15 and 25% of operating cost, fuel efficiency comes high on the list of improvements to be expected from each new model of engines and aeroplanes. Therefore, new types of aircraft come fitted with winglets, composite materials and more fuel efficient engines and are definitely much more fuel efficient than older versions, saving on cost and improving on profit margins.
“The initial acquisition cost of these old aircraft is cheaper. However, they are extremely expensive to run and maintain properly. In the long term, this proves to be a very bad economic decision, as the airlines can barely carry out up to three C check cycles (four and half years) before the aircraft is abandoned due to the prohibitive cost of maintenance.
“This explains why most of our airlines have a short life expectancy, about five years,” Pam added.
A few years ago, the government came out with a rule that aircraft above 22 years old, must not be brought into the country. The move, according to the Nigerian Civil Aviation Authority (NCAA) was to ensure that Nigeria does not become a dumping ground for old aircraft.
BusinessDay checks show that apart from Arik Air, with the youngest airplanes (average age of less than eight years) other airlines parade aircraft between the ages of 12 to 18 years.
According to Boeing, a major aircraft manufacturer, many factors drive the demand for replacement of old aircraft. Age, according to the corporation, is one, but other factors include relative airplane economics, maintenance requirements and overall market environment. It said in recent years, high fuel costs have played a larger role in influencing decisions to remove airplanes from service.
Roy Ukpebo Ilegbodu, the Chief Executive Officer, Arik Air, said that during C-checks, airplanes are stripped and almost rebuilt. It cost money; the technicians are paid in foreign exchange. Anywhere from $500,000 to $1million is what airlines need for a C-check.
“When the airplane is going for a C-check, depending on the age of the aircraft, there are some things that the manufacturers will look at. For instance, for an airplane that has flown for 1,000 hours, there are things they expect. So, based on that, the checks will be done.
“As airlines carry out the checks, you may find out more than what the manufacturers will have recommended. You find things like corrosion for airplanes that have operated in our region because of the moisture. When you find corrosion in an airplane, the cost of repair sometimes will double. But the good thing is that Arik’s airplanes are very new, so you hardly will find corrosion in airplanes that are less than 10years old,” Ilegbodu added.
Igwe Francis, the Public Relations Officer, National Association of Aircraft Pilots and Engineers, said that what matters is that aircraft are maintained to a minimum approval standard, and not necessarily the age of the aircraft.
“The NCAA has always assisted operators to acquire new fleet. This was put in place through the Cape Town Convention, which Nigeria signed many years ago. This was what Arik benefited from. Under the programme, the NCAA serves as guarantor to the operator. I can assure you that the 22-year age limit on aircraft brought into the country still stands,” a source at the NCAA said.
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