Business

Imperatives of homegrown MRO to save local airlines by Captain Everest Nnaji

Acquiring a commercial airplane costs airlines a fortune. More toxic is the N612 million a local airline must pay for its maintenance every 18 months.

Deregulation of the local air travel industry in the 1980s opened a new chapter in Nigerian aviation business, and most notable is the birth of the free entry and exit for all-comers.

Unlike when Nigeria Airways, with elephant-crested airplanes ruled the airspace, the new era saw the emergence of several airlines, with incredible fleet expansion rate such as is unknown to emerging airlines around the world.

They shared common trend: the euphoria of a new airline and its ego trip only lasted for a year. By the second year, harsh realities began to set in. One after the other and before the managers knew it, the airplanes were due for routine maintenance overseas. With the corresponding bills came shockwaves and sleepless nights. Aviation business is not a tea party after all.

“Some of the repairs were even more than the cost of the airplanes,” an ex-CEO offered, because the assets were initially purchased at an auction rate typical of buy one, get one free.

So, aircraft started leaving for maintenance course but never return. Others simply retired to local airports’ graveyard within two years of their acquisition.

And so were the airlines that bought the liabilities too. By the fourth or fifth anniversary, many of the airlines were already history. It was the era of easy come, easy go.

The fact is that scheduled maintenance programmes in aviation industry spare no cost at all. Bear in mind that aviation is dollar-denominated, and where $1 equals 306 local currency, the cost of maintenance in naira equivalence would cost an arm and a leg.

Indeed, the mandatory maintenance programme, ranging from minor to complex checks, could per session, and on an aircraft, cost at least $2 million (N612 million) – a financial blowout in the operations of struggling local airlines, with multiple planes in its fleet.

And due to the huge financial burden, a total of 91 commercial aircraft operated by eight surviving airlines have lately reduced to about 67 serviceable planes.

Whereas the financial burden is avoidable by stakeholders’ estimates, overseas repairs continue to drain the lean purse of local operators lowering their capacity, revenue and chances of survival.

A must-have facility
Specifically, a maintenance facility, otherwise known as Maintenance, Repair and Overhaul (MRO) organisation, is an essential requirement in civil aviation, to ensure aircraft are top-notch, airworthy for passengers and cargo without the fear of falling off the sky.

Aircraft maintenance checks are periodic inspections that have to be done on all commercial/civil aircraft after a certain amount of time or usage. Checks range from A to D.

A and B checks are minor routine checks that a team of engineers do perform at an airline’s hanger. C and D checks are more complex demanding expertise at top-range facilities.

For a commercial jet, a C-check is mandatory every 18 months according to the Nigerian Civil Aviation Regulations. It requires the inspection of most of the aircraft’s components and some replaced in a maintenance programme lasting an average of two weeks. D-check is the complete overhaul of an aircraft that may be done every six years.

Some local airlines currently do A and some part of B checks locally. They all fly the aircraft to Europe or few African countries for C-check that has been described as the most burdensome on the overhead of airlines.

Average cost of a C-check is $2million (N612million) or more depending on number of components that need replacement during the repair exercise. This, therefore, explains why aircraft maintenance alone cost about 30 per cent of operating cost of most airlines.

Once upon a time…
The Guardian learnt that back in the days of Nigerian Airways, a national carrier owned and operated by the Federal Government until 2003, all the checks were done locally.

A member of the engineering team, Ayuba Kyari, recalled that the Lagos hangar conducted C-checks on Boeing 737 aircraft type and D-check on Airbus A310 in the fleet of 30 aircraft paraded by the defunct airline. The MRO facility was liquidated with the airline in 2004.

Arik Air acquired the assets of the national carrier at an undisclosed fee, though allegedly at a giveaway price. Part of the deal was to resuscitate the MRO by 2016, after about 10 years of operations.

By 2016, Arik was at the summit of inefficiency, mismanagement and high indebtedness just like the twilight of Nigeria Airways.

With signs of collapse imminent, the Asset Management Company of Nigeria (AMCON), a special purpose vehicle of the Federal Government for the recovery of bad debts, stepped in, sacked the managers and appointed a receiver management to stabilise Arik Air. About two years since the takeover, there is no case yet for an MRO.

Capt. Dung Rwang Pam recalled that the then MRO of Nigerian Airways was a 1977 initiative of the Federal Government to cater for the burgeoning aviation industry.

It was quite unfortunate that 40 years later, despite “bogus contracts in millions of dollars”, Pam said, the facility does not exist nor is it duplicated.

“Instead, spirited efforts by private individuals, corporations and state governments have elicited no support from the Federal Government,” he said.

Unbearable cost of going overseas
Today, most local airlines in commercial operations fly to France, Germany, Lithuania, South Africa, Kenya and Ethiopia among others to do C-checks. Arik Air, for instance, currently patronises a MRO facility in Lithuania, a country of 2.8 million population.

Currently, eight airlines operate in the local airspace in Nigeria with at least 91 aircraft in total. Air Peace has over 30 aircraft. Arik Air, in its heydays had 28, with about nine now serviceable. Aero Contractors has 10, with about five currently in use. Azman Air and Med-View have four apiece. Dana Air, five, Max Air three and Overland Airways has seven airplanes. In total, the airlines spend N41 billion on C-checks alone every 18 months.

For reasons not unconnected with the huge cost of maintenance, only 67 out of the 91 are in operations. The Guardian learnt that the inability of two domestic carriers to pay the bills has left some of their aircraft stranded overseas like it happened in the past.

Air Peace airlines has the lion share of the total fleet size in the country. Ditto for its over 30 per cent share of 10.1 million local air traffic recorded in 2017, according to Nigerian Civil Aviation Authority’s (NCAA) harmonised figures released in June 2018.

By the traffic estimates, Air Peace perhaps made over one-third (N31.2 billion) out of the N93.6 billion the airlines generated from ticket sales in 2017.

With about 30 aircraft operating both local and regional routes, it implies that Air Peace spends N18.4 billion every one-and-a-half year, which is over 60 per cent of its revenue in 2017.

Given other critical obligations like multiple charges, fuel, staff salary and other forms of maintenance, it is easier to see why airlines hardly last more than five years in Nigeria.

The spokesperson of the airlines, Chris Iwarah, said notwithstanding the maintenance cost burden, safety is their priority and the airlines would stop at nothing to give their customers the best.

Iwarah reiterated that the aircraft were not only maintained at some of the best facilities in the world, but the airline also has a reputation for spending millions of dollars on each C-check exercise to ensure the assets were in top shape because of the premium it placed on the lives of its customers and crew.

The carrier added that in line with its strict maintenance and safety standards, it had retained the services of BCT Aviation of the United Kingdom for its routine maintenance programme at its base in Lagos, 24 hours a day throughout the year.

Airplanes and dangerous delays
Indeed, there are several reasons airlines fail in Nigeria and one of them is the poor utilisation of capacity. This is either caused by old inefficient aircraft or because of multiple delays that slow airplane operations down.

Managers of airlines around the world understand the economics of maintenance programme, hence, the policy to keep the fleet young. For instance, carriers like Singapore and Emirates maintain fleets with airplanes that are not older than five years on the average.

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