Air travellers across Nigeria have decried the high fares being charged by airlines for domestic flights despite the massive decline in the cost of aviation fuel.
Airlines still charge as high as N60,000 for one-way ticket for domestic flights in Nigeria, despite the decline in the cost of aviation fuel from over N900 per litre to a little above N600 per litre, which is a 20 per cent reduction.
THISDAY investigation revealed that in the past four weeks cost of aviation fuel, known as Jet A1 has dropped to N630 per litre in Lagos, N650 per litre in Port Harcourt, N670 per litre in Abuja and N685 per litre in Kano, which is about 20 per cent lower than the N900-N1000 per litre the product sold for few months ago.
Industry observers argued that since cost of aviation fuel was critical in total cost of operation, any reduction in the prices should also reflect in fares because in Nigeria fuel contributes to over 60 per cent of cost of flight operations.
In a chat with THISDAY, the CEO of Cleanserve Energy Limited, Chris Ndulue, one of the factors that contributed to the reduction in the cost of aviation fuel was increased supply.
Ndulue also explained that the price of crude oil in the international market has dropped adding that foreign exchange had also been stable.
He added that logistics surrounding the movement of the product from the supply end was beginning to ease off, unlike in the past.
On whether the relatively low price of aviation fuel should reflect on airfares, Ndulue who was former Managing Director of Arik Air, said: “The problem of airlines is hydra-headed, which include foreign exchange and high cost of maintenance. So, fares are not likely going to come down because other factors that contribute to cost of operation have not adjusted downwards.
“The reduction of the cost of aviation fuel can only give airlines a little breathing space. There is still the challenge of FX and the floating of the naira may bring uncertainty, raise the cost of foreign exchange before it begins to go down and we have to recognise that passenger numbers are down and the cost of maintenance is still high.”
In his reaction, the Managing Director and CEO of Aero Contractors, Ado Sanusi, told THISDAY that ideally when the price of a commodity that plays significant role in production is down, the price of the product ought to be down also.
Prices in Nigeria, he noted, rarely come down and also observed that with the floating of the naira, there is hope that inflation would be driven down and then airfares would go down.
Sanusi also noted that with the new policy on naira, it is hoped that banks would now sell dollars to airlines and make it easy for them to access foreign exchange, which would eventually stimulate fare reduction.
He added that fares in domestic travel will not go down immediately with the unified exchange rate, remarking that it might spike price of dollars temporarily but it will eventually come down.
He said with year-on-year comparison, there is low passenger traffic in air travel, “but compared to daily capacity and the number of passengers willing to travel, the number of available seats is not meeting passenger demand and this has contributed to the high cost of fares.
“In developed markets if price of fuel goes down you expect it to reflect in the fares, but in Nigeria it is not that way. When prices go up, they rarely come down. Everything in Nigeria keeps on going up. We hope that this new policy on forex, the floating of the naira and availability and reduced cost of aviation fuel will cascade down the fares. With that new policy on the naira, we are ready that banks will sell dollars to airlines. That will ease forex challenges. But the price of ticket in domestic travel will not reflect immediately but it will reduce the fares on international travel. The unified exchange rate may temporarily spike cost of dollars but eventually it will go down.”
On his part, the Head of Communication, Dana Air, Kingsley Ezenwa, told THISDAY that the reduction in the price of aviation fuel was not significant enough to reflect in the fares, remarking that aviation fuel at N630 per litre is still very expensive because airlines, last few years ago, bought the product at N300, N400 per litre.
He said that fares cannot just come down like that but observed that generally fares are not relatively on the high side at the moment, adding that even when the price of a litre of Jet A1 was N900, Dana Air still managed to sell low inventory tickets for the first passengers that book the airline’s flights.
“Even when it was N900 per litre we still managed to ensure that those who booked early still got lower fares. There are still other factors that keep the cost of operations high. Dollar is still N700, it adds hugely to the cost of operation because of maintenance is high. However, every airline manages its own affairs to sustain its operations,” he said.
On passenger traffic, Ezenwa said Dana still records 85 per cent load factor, noting that passenger movement may not be as low as thought in this period of the year, adding that in Dana Air the fares are still pocket friendly, especially if a passenger books flight early.
“With the new monetary policy introduced by the new administration, it is expected that Nigerians will have more disposable income to travel by air and also fares will become more competitive with the reduction in the cost of aviation fuel, “Ezenwa said.
