By 
George E Uriesi
By George Uriesi
Taking delivery of a brand new, ‘tear rubber’ aircraft, right off the production line, is a small step for a large airline. But for a small airline, it is a big event! It’s a major project. You have to first order for it, way in advance as part of a number of units in an order (as it is unlikely that major aircraft manufacturers will build an airline a single aircraft).
At the point of making the order, you pay the first deposit (the manufacturer has to be sure that you really mean it, so they can commit to starting the massive logistics process of manufacturing aircraft for you). Thereafter, exactly one year to the scheduled date of delivery of each aircraft, you would have to have finished paying an agreed substantial amount as deposit for that particular aircraft, so that they can then commence the production (yes, it takes a year to put an aircraft together).
Interestingly, from the very start, you have to secure financing for the deposits. Only large airlines can pay deposits for aircraft from their working capital. For small airlines, your working capital is just enough to keep the business operating. The large amounts of money required for aircraft acquisition need to be financed.
So for a small airline, you’ve committed to loans that you’re already paying for, way in advance of the delivery and entry into service of the aircraft you’re financing. This in itself is a delicate balancing act as you’re paying back loans for future aircraft from current working capital.
To be fair though, there are special financing vehicles for aircraft deposits (called Pre Delivery Payments), that wait until the aircraft begins to operate before you have to pay back. But as a small and new airline, especially a Nigerian one, you need to first build your international credibility in order to begin to gain access to and benefit from those facilities. So, for now, you have no choice but to pay in advance. (That credibility is now in view though).
Meanwhile, your new aircraft has entered into production. At every stage during the production, you’re kept informed and up to date on the process. They’ve fused the fuselage. They’ve attached the wings. They’ve put in the landing gears. They’ve attached the engines. They’ve done the wiring. They’ve put together the interior. They’ve put in the avionics and cockpit. They’ve sprayed the aircraft in your livery. They’ve done the first test flight, etc.
Then you show up to take delivery. You see the aircraft live for the first time. You’re very happy. The airline’s engineers are walked through everything. They check and recheck everything. Then the airline’s crew take it up for a spin alongside the manufacturer’s test pilots, to check it out. It’s called a ‘delivery acceptance flight’. They do quite a lot with it to be happy.
After all of that, a check list as long as your arm is ticked off one by one. Engineers, pilots, cabin crew, everything! And then the lawyers get involved. Agreements are scrutinized. And then when everyone is happy, the full financing for the aircraft which has already been secured, is paid and you sign for the aircraft and take delivery of it. (This delivery process can last up to two weeks, sometimes more, until both parties are fully happy)!
Voila!!! The multiple millions of dollars borrowed have been converted into a shiny, gleaming piece of metal, reflecting sunlight like polished silver. Everyone is happy. But this is just the beginning. This gleaming piece of ‘polished silver’ must in turn now be converted into plenty money, to pay for its operation as well as pay back the loans taken to purchase it and still leave some gain for the airline at the end.
So, we can only afford to be happy for a very short time. Now we must turn our attention to making the brand-new aircraft pay for itself and build the business over the next few years. And of course, start the cycle above again, for the next delivery, whose production has already begun!
As we say in Nigeria, “God will help us”! Amen.
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