Dollar Shortage Threatens Aircraft Insurance, Operators Lament

Dollar Shortage Threatens Aircraft Insurance, Operators Lament

As the naira continues to freefall against major currencies, especially the dollar, airlines, according to the Chief Operating Officer of Ibom Air, Mr George Uriesi, are feeling the brunt more than expected as many don’t have enough foreign currency to pay for insurance.

Uriesi stated this over the weekend at the third edition of the AviaCargo Chinet Conference 2023 held in Lagos.

In his presentation at the conference, the COO specifically said that the situation had led to high insurance premiums for the airlines and wondered how some of them were coping with the situation.

He stated that this was a major challenge to operators as aircraft and other equipment must be appropriately insured by the airlines before being deployed to service.

According to Uriesi, the perilous situation needed urgent government attention and warned that the present condition may lead to the collapse of some of the carriers.

He further expressed that the operators were having difficulties accessing the dollars through the Central Bank of Nigeria as they encounter a lot of delays.

He said, “Insurance is a growing problem and because we cannot fly an uninsured aircraft we have no choice, but to hang in there and source for the dollars to do the insurance.

“The losses we accumulated were mainly dollar-based components, when you are procuring dollars above the then CBN rate, you apply when it was N400 to a dollar and you get it at N680. The difference is a lot.

“Now, it is being floated and it is running faster. Recently, we bought a dollar for N915, but on the platform, it was put at N890. Today, it is N900 on the platform I’m sure when we are getting it, we would procure it at N950.

“The new style now is they tell you ‘give us cash and when we buy dollar we will give you.’ But, it delays, you ask for your cash back and they tell you that you wouldn’t get the dollar.”

“Then when they now have the $400,000 they will now tell you the price they got far exceeds what was paid and you need to add more. That is where we are now, I don’t know how other airlines are managing the situation.”

Also speaking, the Chief Executive Officer of Aero Contractors Company of Nigeria Limited, and a former CEO of the Nigerian Airspace Management Agency, Captain Ado Sanusi while reacting to Uriesi’sclaim said, “The issue of forex and airlines has been there for a very long time, it’s just coming back because the naira to dollar exchange rate has gone up and then the availability too has become a bit scarce. This is a bit due to because the CBN is trying to keep up to their commitment on the allocation of foreign exchange. For airlines, it’s a challenge but that doesn’t mean that you’d fly the airplane without insurance cover, it’s illegal, you can’t do that, no pilot will fly an airplane without insurance and I believe those are the things that pilots check before they fly an airplane. It’s left for NCAA to make sure that airlines are well insured and are not using insurance companies that are not recognized by the National Insurance Commission. I’ve been saying this for a long time that insurance is one of the biggest challenges for an airline, because of country risks and the likes, insurance companies are requesting for higher premiums and then when you come you have to pay foreign currency, this makes it very hard.

The Nigeria Civil Aviation Authority, on Sunday, warned airlines and allied aviation services against violating the Nigerian Civil Aviation Regulations (Nig. CARs) 2022 on insurance cover for their equipment.

The Director-General of Civil Aviation, Capt. Musa Nuhu warned that non-adherence to this regulation would attract immediate sanctions, including grounding the specific aircraft and taking enforcement action against any airlines or service providers that defaulted.

Nuhu stated that this directive contained in an All Operator Letter referenced NCAA/DG/AIR/11/16/369, dated August 11, 2023 and addressed to all airlines and allied aviation services providers, which was personally signed by him.

The statement hinted that compliance was a sequel to the coming into force of Nig. CARs 2022 on July 10, 2023, which made it mandatory that all airlines comply with Part 18.14.1.1 of the regulations.

According to him, Part 18.14.1.1 of the regulations provides amongst others that all airlines and other allied aviation service providers must not operate without adequate and valid insurance cover and submit to the authority copies of valid insurance certificates, evidence of payment of premium and other policy documents of insurance cover of not less than three months as specified in IS: 18.14.1.1.

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