With its national flag carrier extinguished by corruption and embezzlement, six major air disasters in the last decade, and airports that correspondents compare to refugee camps, Nigeria’s air industry is troubled. The country’s super rich have turned to buying their own private jets, Tell Magazine reports. There are now three times as many private jets in Nigeria as the combined fleets of the country’s seven commercial airlines.
Most of these private jets are registered abroad, allowing the owners-businessmen, religious figures and pop culture stars-to remain anonymous, as well as pay lower insurance premiums than insurers would collect on a jet officially maintained in Nigeria. Many of the owners appear to be using their jets as illegal moneymakers by selling flights on them, the magazine reports.
In spite of the economic hardship in the country, a growing number of affluent citizens are acquiring private jets, whose present fleet surpasses the combined number of commercial aircraft in the country.
As a business executive, Robert Habjanic, director, After-Sales, Bombardier Business Jets, operates a very tight schedule. Spending more than a day on a business trip means the stakes are really high. It was therefore instructive when Habjanic and his team spent four days in Nigeria to explore business opportunities and also attend a training workshop on Aviation and Space Law with the theme: Safety and the Nigerian Aviation Industry, organised by the Nigerian Institute of Advanced Legal Studies, at the University of Lagos, recently.
The catch for Habjanic is the booming Nigerian private jets market, which is currently estimated to be worth almost N600 billion [$3.75 billion]. He spoke glowingly about Nigeria’s emerging market for private jets, believing it to be a good sign of economic growth in the country. “The market is good and I consider it very positive. We will not spend four days here if we don’t feel it is justified. As a sales person I will say I am very optimistic,” he said.
Segun Agbaje, managing director and chief executive officer, Guaranty Trust Bank, GTBank, who puts the number of private jets in the country at 150, last week, estimated their current value to be $3.75 billion (N580 billion), adding that a private jet has an opening price of $25 million. These jets, with the most popular being the Gulfstream, Hawker Legacy, Global Express, Dassault Falcon, and Bombardier, are owned by high net worth Nigerians, he said.
But Agbaje’s estimation on the value of these “luxury birds” may have been an understatement. A top source in one of the regulatory agencies told the magazine that the number of jets so acquired in recent years would be in the range of $6.7 billion (N1.02 trillion). Checks on the website of some leading private jets manufacturers like GulfStream and Hawker Siddley of the United States, US, Embraer of Brazil, and Bombardier of Canada revealed that an average jet goes for between $40 and $65 million (N6.4 – N10.4 billion). However, some jets are cheaper, depending on the capacity and manufacturer.
Through the office window of an aviation top shot whose office shares boundary with a portion of a hangar in Lagos, through his office window, different types of private jets could be seen, ranging from the Gulfstream 450, 550 and 650; Bombardier Challenger 604, 605; Global Express; Embraer Legacy and Falcons; and Hawker Siddley 125-800 and 900XP, amongst others. A roll call of owners of these jets ranges from state governments, politicians to businessmen, and clerics. Akwa Ibom, Cross River, Rivers, and Taraba are some of the states having private jets. David Oyedepo, general overseer, Living Faith Church Worldwide, otherwise known as Winners’ Chapel; and Enoch Adeboye, general overseer, Redeemed Christian Church of God are some of the clerics who own private jets, while Deinde Fernandez, Mike Adenuga, Aliko Dangote, Femi Otedola, Ifeanyi Ubah, Tunde Folawiyo, Jimoh Ibrahim, amongst several others, make up the category of business magnates who fly private jets.
Indeed, the desire for acquisition of private jets by wealthy Nigerians has been on the upswing in the last six years. From about 20 jets in 2007, the figure rose to about 150 by late 2012, representing a 650 per cent rise in private jets ownership in the country. Bombardier, the Canadian aircraft manufacturer, says the country ranks behind the United States, United Kingdom, and China among countries that top their orders for the supply of its aircraft type.
Yet, the private jet sector is expected to grow by about 40 per cent this year, which will take the tally to 200. This is because several jets are said to be on order awaiting delivery later in the year and in 2014. In the last quarter of 2012, Habjanic was in Lagos to showcase one of Bombardier’s latest private jets, Global 6000, and disclosed that Nigeria was the company’s largest market in Africa, with about 35 Bombardier-made business aircraft currently flying its airspace.
The growth in this sub-sector is considered a source of blessing to the industry. This is because it has led to the development of private jet hangars providing support services and maintenance. Examples of these hangar jet centres located at the Murtala Muhammed Airport in Lagos, are Evergreen Apple Nigeria (EAN) Limited, the country’s first commercial private jet hangar; Execujets Nigeria, a member of the Execujet Aviation Group; and Caverton Group, among others.
Industry operators say an average of 42 private jets land at [Lagos Airport] daily and about 1,200 monthly. For instance, EAN hangar is said to receive 15 private jet flights daily, that is, an average of 450 flights per month. And for Olumide Ohunayo, an aviation consultant, this is an indication that the economy is expanding since it comes with increasing investments within the country.
Several factors are said to be responsible for the increasing demand for private jets by Nigerians. Ohunayo contends that private jets allow for instantaneous travel that scheduled airlines cannot provide. Indeed, domestic carriers have disappointed passengers with flight delays or even outright cancellation in some instances without giving any reason or compensating their passengers for loss of time. This, amongst other factors like the need for privacy by some wealthy Nigerians, increasing political and religious issues, Ohunayo noted, are contributory factors to the upsurge.
Other factors border on insecurity and the urgency required by modern businesses and businessmen, which commercial airlines cannot support. This point was well accentuated by Adeboye, Nigeria’s well-respected cleric when he explained in an interview with a foreign news network that he bought a private jet to facilitate his work smoothly as the head of the church. “When you have to oversee churches in 160 countries, you can’t do that on a bicycle,” Adeboye was quoted in the interview.
However, with a growing list of these jets, it is increasingly becoming more difficult to identify the owners. This is because in most instances, they buy them through some foreign companies who in turn put them on lease to other companies in Nigeria. According to investigations by the magazine, over 70 per cent of private jets in the country carry foreign registration. TELL’s source in the Nigerian Civil Aviation Authority (NCAA), explained that jets so registered abroad may have been originally owned abroad, meaning the Nigerian owner would have acquired it on a lease purchase in which case the original owner will supply the crew, be responsible for its maintenance, and insurance. “This means the originating civil aviation authority has control over the aircraft, but that is not to say that the NCAA has no control over the aircraft,” the NCAA source explained. Besides, foreign registered aircraft enjoy a lower insurance premium than locally registered ones and also attract good second-hand value if the owner chooses to sell it. These explain why foreign registration is considered a more attractive option for Nigerian private jet owners.
Maintaining these jets does not come cheap. The charges, however, vary depending on the weight and size. A jet is charged for parking and landing by aviation agencies; fuelling, maintenance, certifications, insurance, crew salaries and other operational cost. An average pilot on a private jet earns about N300,000 monthly.
To many wealthy Nigerians, flying around the country or the world in private aircraft sets one apart from his peers; it is a status symbol. To many Nigerians, 70 per cent of whom are said to live below the poverty threshold, the trend is negative show of affluence that insults their sensibilities. And Nuhu Ribadu, former Economic and Financial Crimes Commission, EFCC, boss has condemned the trend, blaming it on the state of corruption in the country. Ribadu expressed worry that between 2008 and 2009, 28 Nigerians bought private jets at the expense of the development of the nation. According to him, corruption has denied the average Nigerian the basic necessities of life and stunted the development of socio-economic infrastructure, yet, so much affluence is being displayed by a few.
But Ohunayo argues that if properly harnessed, the economic gains from the private jet sector would be very useful for the revival of the ailing aviation industry. This would come in the form of taxes on these jets. He, however, regrets that “globally, private jets are taxed and made to pay higher charges to fund the civil aviation system and to reduce congestion; but that is not the case here in Nigeria.”
But that may no longer be when the new measures to harness the benefits of a thriving private jet sector are eventually put in place. Already, government has formulated a new policy to block revenue leakages from this sub-sector. It is estimated that government loses N3.2 billion annually in taxes to activities of illegal charter operations by some owners of these private jets. A source hinted that private jets have been severally deployed for commercial purposes but under the guise of being a private flight to avoid the payment of taxes. The source told the magazine that owners of such jets fly their friends and other passengers to their destination within and outside the country for a fee. This action deprives regulatory agencies of revenue that should have accrued to them had it been a commercial flight.
But this may soon be a thing of the past. Under the new National Civil Aviation Policy, NCAP, 2013, stricter rules have been outlined for private jet owners in the country. Private aircraft will now be restricted to carrying only the owner or his family members as passengers on board, while for such aircraft owned or leased by companies, the company’s employees and board of directors will be allowed to use the aircraft; all passengers on board will also have to declare their identities. For such aircraft, the approval or clearance from the director-general, NCAA, will not be required as they are regarded as non-revenue flights. It is believed that the implementation of this policy will help to reduce revenue loss to government.
Similarly, the foreign registered private jets may be in for a stiffer regulation. Stella Oduah, minister of aviation, has directed that this category of jets will no longer be allowed to stay in the country beyond 15 days as recommended by the NCAP. As explained in the policy document, “Retention of foreign registered aircraft in Nigeria will not be permitted beyond a period of 15 days from date of entry. However, the minister of aviation may, in certain circumstances, grant the extension of this period for up to 60 days.” The new policy also provides that foreign-registered private jets on special mission in Nigeria would be allowed to stay for only 60 days, following a special approval from the office of the minister of aviation.
With over 70 per cent of private jets in the country carrying foreign numbers, this policy will no doubt affect so many of the business moguls, pastors, and politicians, whose private jets are registered in the US, United Kingdom and South Africa. Some industry analysts say the new policy will force owners of private jets with foreign registration to de-register them and then register them in Nigeria.
The policy, which took the federal government one year to prepare has since come under severe criticism. The task of identifying who a family member is has remained a source of concern to many stakeholders given the reality of extended family practice that prevails in the country. Particularly irksome to them is the requirement that the owner of a private jet is not allowed to fly his friends or business associates. “Although I find it offensive that the privileged few are displaying their wealth in that manner in the midst of abject poverty and want that pervade the country, I do not consider it appropriate that a private jet owner should be restricted from asking his friends or business associates to join him on board,” argued Segun Adebiyi, a business and management consultant.
Fola Akinkuotu, director-general designate, NCAA, however, says the benefits of the new policy is enormous as it will enable safety of passengers and ensure proper insurance of private jets. He said that the ministry of aviation and other stakeholders were currently looking into determining who a family member is. “We know that private jet owners use it for charter purposes. But the issue of family member is being looked into,” he said. Nnamdi Udo, managing director, Nigerian Airspace Management agency, NAMA, said that private and chartered aircraft operators are to indicate the identity of their passengers before their planes are cleared for take-off, saying it became imperative as part of the safety and security measures in the aviation sector, in view of the security challenges facing the country.
However, many stakeholders are worried that the preponderance of private jets in the country is now beginning to constitute a source of worry to the airports, as it is believed that no singular airport in the country can accommodate the fleet. For instance, due to the number of jets flown into Ilorin, Kwara State during the burial of Olusola Saraki, the late godfather of Kwara politics, the parking space at the Ilorin International Airport, was congested. Akin George, a captain and former managing director of Aero Contractors, is worried at the increasing number of private jets being parked at most of the aprons of Nigerian airports. But Oduah, at the inauguration of the remodelled Abuja airport, acknowledged the fast growth of Nigerians acquiring private jets and stated that the terminal was built for the projected increase of high end users of the facility.
The upsurge in private jets also presents a sorry picture of the nation’s commercial aviation sector. Currently, the number of private jets in the country is far in excess of the combined total capacity of the existing commercial airlines. At the moment, only seven commercial airlines – Aero Contractors, Arik Air, Landover, Chanchangi, IRS, Medview, and Dana operate in the country, while 10 others offer charter and cargo services. The seven airlines have 47 aircraft. In the last 10 years, 33 out of 50 licensed airlines in the country have collapsed due to global economic recession and the inability of operators in the sector to comply with newly introduced regulatory standards.
Stakeholders in the industry are worried that except urgent steps are taken, the domestic carriers may completely vanish. In this vein, Mohammed Tukur, assistant secretary, Airline Operators of Nigeria, AON, wants airlines to form mergers which he reasons will put them in better stead. “Globally, airlines are merging. Our airlines should do likewise to enhance their operations,” he advised.
Government is not also folding its arms in the effort to ensure a thriving aviation sector in the country. Under the new intervention fund of the federal government, domestic aircraft operations is expected to be boosted. Oduah explained that to ensure that the money is used for the intended purpose, it would be paid [directly]to aircraft manufacturers or lessors for airlines to acquire newer fleet. The new strategy, according to her, is because the previous intervention fund given to the carriers did not grow the industry. “The [Nigerian Central Bank] with the approval of the ministry of finance, pays directly to aircraft manufacturers of the leasing company. The leasing company would in turn bring the aircraft to our airline operators. The airline operators would now have access to brand new aircraft; if not brand new, but relatively brand new aircraft. Passengers will have access to functional airline that can take them to where they want to go safely,” she said.
However, it is yet to be seen how this will transform the country’s aviation industry to attract the patronage of these wealthy Nigerians. But for now, it appears that private jets will continue to take the centre stage for a long time.
28 May 2013