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Aviation Crisis Deepens as Arik Suspends Operations – FG May Intervene, Says Ministry Official

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Hundreds of passengers of Nigeria’s biggest airline, Arik Air, were left stranded at airports across the country and beyond on Tuesday because of suspension of flight operations by the carrier.

Arik is having problems with the renewal of its insurance policy.

At the Murtala Muhammed International Airport, Lagos, and the Nnamdi Azikiwe International Airport, Abuja, it was observed that all the ticketing and reservation stands of the airline were closed and customers were directed to other carriers.

Airport officials told one of our correspondents that the carrier had been having issues for some time and that these were affecting its smooth operations.

The airline said in a statement that the development was caused by documentation issues relating to the renewal of its insurance policy.

It said the delay in renewing the insurance policy was caused by the two-day holiday, which was declared by the Federal Government to celebrate the Eid-el-Kabir.

Arik said the suspension of flights might  continue for the next few days until the approval of a waiver on a priority basis by the National Insurance Commission for a new insurance company to renew the policy.

It added that during the period of the disruption of operations, the management of the airline would be working hard to resolve the necessary documentation issues.

The statement read in part, “Arik Air, West and Central Africa’s largest airline, has alerted all air travellers of a temporary disruption to its operations pending approval of aircraft documentation related to insurance renewal. The airline said that it was working around the clock to resolve the necessary documentation, which has been a challenge due to the long weekend holidays.

“At the present time, all flights of the airline have been cancelled for Tuesday, 13 of September, 2016, and the airline has stated that it would be getting in touch with passengers to provide an update on rescheduling of their flights.

“This situation is likely to continue for the next few days until such time that NAICOM approves a waiver on a priority basis for the new insurance company to renew the policy.”

The airline however advised its customers to visit either its website or any of its ticket offices to know the status of their flights before proceeding to airports.

Arik Air’s Group Chief Executive Officer, Dr. Michael Arumemi-Ikhide, said, “The airline wishes to advise and assure the public, its customers, stakeholders and partners that we are fully committed to returning to our normal operations and minimise any unfortunate inconvenience to our passengers.

“Where flights have been cancelled, the airline will notify passengers through SMS and in such cases, passengers will be accommodated on first available alternative flights as soon as normal flight operations resume.

“The Group CEO apologised and appealed on behalf of the airline for the understanding of passengers, while it works diligently to resume normal operations at the earliest time.”

The Nigerian Civil Aviation Regulations kick against any airline operating an aircraft that has insurance issues.

Part 18.11.2 of the regulations dealing with aviation insurance states that “no person shall operate any aircraft in the public air transport category without adequate and valid insurance cover.”

Part 18.11.2.2 of the regulations states that “any person having a duty to maintain adequate insurance shall submit to the Authority on quarterly basis insurance certificates, evidence of paying premium and policy documents.”

However, the Assistant Director, Corporate Affairs, National Insurance Commission, Mr. Salami Rasaaq, said that NAICOM did not have any direct business with Arik Air but with its insurance company.

According to him, the commission did not delay the insurance of the aircraft because the request for the Approval in Principle was only submitted to it on Friday afternoon after the close of work.

“When you submit a request, there is due process to follow before you give an approval. A staff member on special risk had to go to the office today (Tuesday), which is a public holiday, to work on it, and we gave them one-month approval effective from today (Tuesday) to expire on October 12, by which time they are expected to do everything possible to get the one-year approval,” he said.

Rasaaq explained that the commission had specified a minimum of 10 days to the expiration of the policy for the request for the AIP.

“Because they were supposed to have applied 10 days before, which is the minimum to the expiration of the AIP, but the airline did not comply. But even if they did, the commissioner has said we will always work on it because of the interest of the public,” he said.

  • Aero and First Nation

The disruption of Arik’s operations is coming about two weeks after Aero Contractors Airlines Nigeria’s second largest commercial carrier, and First Nation Airlines announced the suspension of operations.

In the case of Aero, the airline had in a statement stated that the suspension was part of the strategic business realignment to reposition it and return it to the path of profitability.

It explained that this business decision, which was as a result of the current economic situation in the country, had forced some other airlines to suspend operations or pull out of Nigeria.

For First Nation, the Director-General, Nigerian Civil Aviation Authority, Capt. Muhtar Usman, had explained that the decision was taken in order to ensure that the airline carried out the required maintenance of its aircraft.

The NCAA DG had said, “First Nation Airline on its part is in the middle of an engine replacement programme for one of its aircraft. Another aircraft is due for mandatory maintenance as allowed by the regulatory authority.

“In these circumstances, these airlines clearly cannot continue to undertake schedule operations, hence the inevitable recourse to self-regulatory suspension.”

  • Foreign carriers boycott Nigeria’s fuel

Meanwhile, the scarcity of aviation fuel occasioned by dollar shortage has made the price of the Jet-A1 fuel to rise by 81 per cent from N220 per litre to N400, Reuters has reported.

This came barely two months after the price of the commodity, which contributes 30 per cent of airlines’ cost of operations, increased from N120 t0 N220 per litre.

The latest increase has made foreign airlines flying into Nigeria to start boycotting the country to refuel, according to Reuters.

It is the second blow for airlines operating in the nation’s recession-hit economy in a year. The Central Bank of Nigeria’s naira peg had made it almost impossible for them to repatriate profits from ticket sales as it tried to prevent a currency collapse.

The crash in the naira since a devaluation in June has led firms who market jet fuel locally, such as Total, Sahara and ConocoPhillips, to double the price to N220 a litre in August, and to as much as N400 presently, an airline executive told Reuters.

A Deputy Director at the Ministry of Aviation, James Daudu, said Jet-A1 prices were deregulated, and therefore outside government control, but stated that the Minister of State for Aviation, Mr. Hadi Sirika, was working with the Ministry of Petroleum Resources to see if “interventions” in the sector were possible.

“It would be a whole sphere of intervention, if possible, from the Central Bank of Nigeria to the Ministry of Petroleum Resources,” he said.

Even at the higher costs, marketers’ lack of dollars has made fuel scarce. Some carriers have had aircraft stuck, or were forced to cancel planned journeys, after frantic last-minute calls from ground staff warned that there was no fuel available.

“The economy is crying out for investment, and now it is going to be even harder for anyone to visit,” an economist with Capital Economics, John Ashbourne, said.

“Who is going to want to park a billion dollars in a country that you can’t even easily fly to? It sends the worst possible signal,” he added.

A spokesman for the Nigerian National Petroleum Corporation did not answer calls for comment.

The central bank hoped floating the naira would attract dollar inflows, but the naira has sunk by 50 per cent, forcing oil firms to charge airlines, stuck with piles of naira, in dollars for jet fuel.

“It’s an impossible situation. The oil marketers don’t want to sign long-term agreements anymore so we have to accept whatever prices they demand,” one airline executive said, adding, “We sell tickets in naira and now they want us to come with dollars.”

Spain’s Iberia and United Airlines cancelled their Nigeria services earlier this year, and two local carriers also halted operations. Other international airlines responded by boosting ticket prices within Nigeria, charging their globe-trotting elite as much as $2,000 for an economy class ticket to Europe to cut losses – more than double the cost of a Lagos ticket bought abroad.

Dubai-based Emirates has started a detour to Accra, Ghana, to refuel its daily Abuja-bound flight, a spokesman said. The airline already cut its twice-daily flights to Lagos and Abuja to just one.

The move was aided by a substantial drop in Ghana’s jet prices amid tax reform last month, according to the Ghana Chamber of Bulk Oil Distributors.

Air France-KLM said it was refuelling abroad in “very exceptional cases” by juggling suppliers and stomaching extra costs.

Germany’s Lufthansa is loading more fuel in Frankfurt for its Lagos flight, where the ground staff doubt their ability to refuel for the final destination of Malabo, the capital of Equatorial Guinea, an executive said. The airline did not respond to official requests for comment.

The scarcity has even pitted airlines against local consumers; a surge in demand for cooking and heating kerosene during the rainy season, when households cannot easily burn wood or charcoal, means if the airlines do not pay up, marketers will sell to locals.

Airlines met with Transport ministry officials last week in Abuja to press for lower fuel prices, industry sources said.

Nigeria used to be one of the most profitable markets for foreign airlines, landing planes with plenty of first and business class passengers to cater to executives and officials jetting around under former President Goodluck Jonathan administration.

British Airways, a popular choice for well-heeled Nigerians, said it was using smaller aircraft on its Lagos-London route, as did Air France-KLM.

Turkish Airlines’ use of smaller planes has added another inconvenience: passengers complained there is not always space for luggage on the smaller aircraft, delaying it for days. The airline did not respond to requests for comment.

  • Ooni’s botched visit to Sanusi

Members of the Yoruba community in Kano went back home disappointed on Tuesday after waiting in vain for the arrival of the Ooni of Ife, Oba Adeyeye Ogunwusi, at the Mallam Aminu Kano International Airport.

As part of activities to herald the monarch into the city of Kano, members of the Yoruba community, including a dance troupe, besieged the airport early in the morning to accord him a warm reception but dispersed disappointed after waiting for several hours.

The President of the Yoruba community in Kano, Alhaji Abdullatif Faisu, said that the trip was aborted at the 11th hour due to problems with the Ooni’s chartered flight.

The Ooni’s advance party was earlier at the airport awaiting the monarch’s arrival, but left with the gift that was to be presented to the monarch when it became apparent that Ogunwusi would no longer make the trip.

Another set of crowd, who had earlier assembled at the emir’s palace, later dispersed when it became evident that the Ooni’s trip had been cancelled.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Oil Rises to $43.76 Despite Falling Oil Demand

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Oil price

Brent Crude Rises to $43.76 Per Barrel on Friday

Oil price extended its gain on Friday despite OPEC and other experts predicting a further decline in demand for the commodity.

The Brent crude oil, against which Nigerian oil is priced, rose from $39.44 per barrel on Tuesday to $43.76 per barrel on Friday before pulling back to $43.42 per barrel.

The oil surged after reports showed that US oil producers were shutting down due to hurricanes and also that crude oil inventories dropped by over 9 million barrels in the week ended September 11, 2020.

The commodity started its bullish run a day after OPEC lowered its demand outlook for the year through the first half of 2021, saying recovery without COVID-19 remained slow.

“Once again, OPEC+ meets against a worrying backdrop of soft global oil prices and an uncertain demand outlook,” Cailin Birch from The Economist Intelligence Unit told CNBC via email on Thursday.

“We maintain our view that Brent crude prices will average just over $42 a barrel in 2020, assuming that OPEC+ partners reconfirm their commitment to output cuts at their September meeting,” Birch said.

Another expert, Tim Bray, a senior portfolio manager at GuideStone Capital Management, through an email said “I do not believe we should expect any material change of course out of the OPEC meeting this week when they review market fundamentals, in part because compliance with previously agreed production cuts has been high,” Tim Bray, senior portfolio manager at GuideStone Capital Management, told CNBC via email.

“It might set the stage for action at future meetings, however,” Bray said.

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Coronavirus: European Investment Bank (EIB) Approves € 12.6bn Financing for Transport, Clean Energy, Urban Development and COVID-19 Resilience

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Outgoing President of the European Central Bank, Mario Draghi and incoming Christine Lagarde.

€ 3.1 billion for COVID-19 public health and business financing; € 3.5 billion for private sector investment and working capital schemes; € 3 billon for clean energy and energy efficiency investment around the world; € 2 billion for Naples-Bari high speed train link largest loan in EIB history.

The European Investment Bank (EIB) today approved € 12.6 billion of new financing for projects across Europe and around the world.

New financing agreed today includes more than € 3.1 billion of COVID-19-related investment to improve public health, strengthen public services and back investment by companies in sectors hit by the pandemic.

Since the start of the COVID-19 crisis, the EIB has approved € 20.1 billion to enable public and private partners around the world to better tackle health, social and economic challenges.

The EIB Board, meeting by video conference, also backed investment in agriculture, water, housing, telecommunications and urban development across Europe, as well as in Africa, Asia and Latin America.

“Fighting climate change and tackling the COVID-19 pandemic must go hand in hand to achieve a green recovery. The EU Bank is working around the world to help mitigate the impact of the pandemic on lives, jobs and businesses; and to ensure that investment focuses on sustainability, innovation, and on reducing the devastating impact of climate change. The 12.6 billion Euros of new EIB financing approved today show how we are working with thousands of local partners to make a long-term difference to people’s lives during these challenging times”, said Werner Hoyer, President of the European Investment Bank.

Largest ever EIB loan to transform travel in southern Italy

Passengers travelling between Rome, Naples and Bari will from 2027 benefit from reduced journey times, a quicker and environmentally friendly alternative to car transport, and improved connections thanks to the largest loan the EIB ever approved.

The EIB board gave the green light for a EUR 2 billion loan to support the construction of the new high-speed train link that will cut journey times by 1 hour and forty minutes between Naples and Bari. More than 2000 jobs will be created during construction and 200 once construction of the high speed line across a European cohesion region is complete.

The new green transport link, part of the Italian government’s “Unlock Italy” decree, will increase the competitiveness of raid transport, reduce carbon emissions and support social and economic development in southern Italy. It is part of the Scandinavia-Mediterranean Trans-European Network (TEN).

€ 3.6 billion to help businesses to better withstand COVID-19 challenges

Ensuring that entrepreneurs and employers can continue to invest and adapt to new challenges posed by COVID-19 is crucial.

Companies in the Baltics, Benelux, Cyprus, France, Italy, Spain, Ukraine, Moldova and Georgia as well as East Africa, Morocco, the Middle East and the Pacific will benefit from new targeted COVID-19 financing initiatives approved by the EIB today.

The new schemes, managed by local financial partners and banking intermediaries, will help reduce economic shocks, unlock new investment and enable targeted financing for sectors most vulnerable to COVID-19 uncertainties.

€ 3 billion for renewable energy and energy transition

Today’s board meeting agreed to support energy investment that will reduce energy use and increase generation of clean energy across Europe and around the world.

€ 1.6 billion will be used to finance small-scale local climate action projects in France, Italy and across the EU, managed by experienced financing partners.

Financing to support construction of new windfarms off the Dutch coast and in Bosnia, improve energy efficiency in Austria and Ukraine, renovate hydropower in Georgia, roll out smart meters in Lithuania and modernise electricity networks in Madeira and Hungary was also approved.

Millions of people across Africa and Latin America will be able to access reliable clean energy for the first time following EIB support for new off-grid solar schemes and energy transition.

€ 2.9 billion to improve urban and national sustainable transport

Rail transport in Italy is set to be transformed by EIB backed investment to upgrade rolling stock on the national network, alongside today’s approval of EUR 2 billion financing for the new high-speed line between Naples and Bari.

The EIB Board also agreed to support new investment to upgrade public transport in Sarajevo and Krakow, and to help improve a key motorway link in Bosnia and Herzegovina.

Improving urban development and social housing

Thousands of families will benefit from new large-scale social housing investment across France and in Germany under new financing programs approved today.

The EIB Board also agreed to support the New Slussen urban development project that will transform of the heart of the Swedish capital Stockholm.

Hospital patients will benefit from EIB support for construction of a new regional hospital in Tournai and approval of a national scheme to improve mental health facilities across Belgium.

A new scheme to support long-term healthcare investment in French regions underserved by medical services was also agreed.

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Crude Oil Rises Despite Demand Concerns as Hurricane Sally Disrupts Further Production

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Oil

Oil Prices Surge as Hurricane Sally Disrupts Oil Production

Oil prices rose on Wednesday despite weak demand after strong hurricane sally threatens to disrupted operations of US oil producers amid a big drop in oil inventories.

Brent crude oil, against which Nigerian crude oil is measured, rose from $39.34 barrel on Tuesday to $41.58 per barrel on Wednesday.

Accordingly, the US West Texas Intermediate crude oil gained 1.8 percent to $38.96 per barrel.

American Petroleum Institute (API), a weekly oil projection report, on Tuesday reported that US crude oil inventories declined by 9.5 million barrels in the week ended September 11, 2020. This, experts at ING Research said if close to the real number due later today, could provide support for global oil prices.

The experts said, “If we see a number similar to the drawdown the API reported overnight, it would likely provide some immediate support to the market.”

This coupled with the fact that with reports that 25 percent of US offshore oil and gas output was halted and export ports were shut as the storm crawled offshore along the US Gulf Coast bolstered oil prices on Wednesday.

Oil prices gained despite OPEC lowering demand for the year, saying weak global recovery amid rising cases of COVID-19 will impact demand for the commodity through the first half of 2021.

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