Airlines Fares May Increase As Aviation Fuel Hits N1,300
Airline operators have disclosed that they may be forced to review fares upward as the aviation fuel surged to above N1300.
This was disclosed in a statement on Friday by the spokesman of local airlines, Obiora Okonkwo, who called for immediate government intervention to prevent the collapse of local airlines.
The airlines stated that the volatility in foreign exchange rates and the rising cost of aviation fuel at N1,300 per litre had disrupted operational planning and stability within the aviation sector.
The unification of the different segments of the forex market by the Central Bank of Nigeria on June 14, 2023, caused the naira to depreciate significantly at both the official and the autonomous markets.
The local currency weakened to over 1,500/$ at the parallel on Wednesday and exchanged 1474.62/$ at the official market on Thursday..
Okonkwo, who also chairs United Nigeria Airlines, noted that the unforeseen rise in aviation fuel prices from N700 per litre and the increase in the exchange rate to 1,400/$ had resulted in significant losses for airlines.
He said, “We are making losses on factors that are beyond our control. We are not only faced with the problem of scarcity of dollars; even the aviation ecosystem is feeling the heat. Handling companies have increased the cost of their services, airports have increased their charges and those that service the aircraft have also increased the cost of their services. The monies for these payments are coming from the passengers who are already exhausted financially."
Okonkwo further explained that numerous businesses in Nigeria were experiencing low returns, leading to a decline in the number of essential passengers travelling during both peak and off-peak seasons. As a result, the airlines were struggling to maintain adequate load factors to support their operations during the current low season, as there were fewer travellers for tourism and social engagements.
He said, “Passenger traffic has shrunk because even those on social engagement like weddings, burials, and other ceremonies may not be inclined to spend money on flight tickets; they would rather send credit alerts to those hosting the events who would appreciate such gestures. So, they pay instead of appearing in person.
“Air travel is a catalyst to economic development. There should have been government engagement with airlines at different levels. Airlines do not have special forex allocation; so, they buy at the same place traders who trade in Brazilian hair, textiles and others buy.
“Our passion to remain in this business is being eroded. We are at the point of oxygen supply. Some airlines are going into a coma. Our equipment is diminishing. The minimal revenues we earn to keep the airlines flying, we convert to pay our lessors."
Similarly, Okonkwo noted that it is impossible to bring in more aircraft. Aircraft owners have become sceptical because of country risk.
He added, “A Nigerian airline may meet their terms, all the standard criteria but the aircraft owners consider country risk above other factors. Country risk supersedes everything and lessors have their own obligations. So, there is nothing personal. Some airlines deposited money with the Central Bank of Nigeria but they cannot provide us the needed dollars."
An aviation industry analyst, who preferred not to be named, told a correspondent that the impact of rising fuel would affect consumers.
He said, “If we increase the prices of aviation fuel or airfares, it will affect the purchasing power of many Nigerians. Passenger traffic may reduce, and airlines may struggle to break even, ultimately impacting their revenue."
He also explained the broader economic implications, saying the aviation sector’s performance was closely tied to the country’s Gross Domestic Product.
He added, “This forex situation will affect the performance of the airlines. It’s a ripple effect that could have far-reaching consequences."