Airlines are complaining about the spiraling increase of aviation fuel price, which has recently risen to N305.00 per litre. The airlines are facing a dilemma. If they reflect the new price on airfares, the fares would become outrageously high that many who travel by air may not be able to afford it.
But if they continue to incur the losses, their operations will not be sustainable in the long run. The inevitable result is that some airlines will be forced to go under.
The Chief Operating Officer of Air Peace, Mrs. Toyin Olajide told THISDAY that currently airlines are bearing the loss of the high aviation fuel prices but noted that it is obviously not sustainable.
She explained that airlines are already operating with slim margin in an economy that is constricting and therefore not friendly and other airlines coming into the market, seemingly insulated from the hard reality, are even selling tickets at below N20, 000, which industry expert and former CEO of Aero Contractors, Captain Ado Sanusi said was not practicable.
“Airlines are bearing the losses incurred at selling tickets below the cost of operation occasioned by the increase in the cost of aviation fuel. The prices are currently about N290 to N305 per litre. We are already operating at very slim margin due to the economy that is not friendly, as many passengers cannot afford high airfares. But other airlines coming are even selling tickets at less than N20, 00. How is it sustainable?
“If we are to reflect a bit of the increase of the cost of aviation fuel to the fares, the average fair should be about N45, 000 but everybody will start complaining. So the increase in the cost of aviation fuel is eating deeply into the pockets of the airlines. Currently we are losing money on some routes because as the biggest carrier in Nigeria, we have to provide service to these routes. It has become a responsibility for us in order to serve the people,” the Chief Operating Officer of Air Peace said.
She added that it is really very difficult for airlines to remain afloat under these circumstances and called on the federal government to urgently intervene in order to save the airlines and ensure that the country has robust air transport system.
The Managing Director of Aero Contractors, Captain Abdullahi Mahmood, told THISDAY that with the increase in aviation fuel prices, airlines are finding it difficult to maintain their current airfare regime and time would come when the fares would have to reflect the cost of aviation fuel; unless the airlines want to go bankrupt.
He regretted that the increase in airfares to reflect the high cost of aviation fuel would impact heavily on air travellers.
Mahmood, however, said the Minister of Aviation, Senator Hadi Sirika is working to see whether the Central Bank of Nigeria (CBN) could create special forex window for airlines; so that they could access foreign currency at lower rate than presently obtained from the parallel market.
“Airlines are finding it difficult to cope with the continuous increase in the prices of aviation fuel. The prices have gone so high. But there is a limited we can increase airfares. We have to get approval before any increase. But the impact will be on the travelling public and soon it will be Christmas holiday when there is high passenger traffic.
“But it will reach a point the airlines will have no option than to increase fares in order to cover the cost of aviation fuel. The Minister is trying to see how airlines can be given special forex window so that they can access dollars at lower amount of Naira than what is currently obtained from the parallel market. This will help the airlines to acquire spares and other services from overseas,” he said.
The Corporate Communications Manager of Dana Air, Kingsley Ezenwa told THISDAY that the cost of aviation fuel is very high but noted that the domestic carrier still maintains competitive airfares because the increase in the cost of the fuel product has not reflected on the fares.
THISDAY investigations revealed that stiff competition is still holding down the airfares and with new entrants and increasing capacity; competition among airlines would continue to be rife.
They added that unless they come together and agree on minimum airfares through the Airline Operators of Nigeria (AON) and backed by the Nigerian Civil Aviation Authority (NCAA), many airlines would go under if they continue to sell tickets at fares below their cost of operation.
“You cannot be selling tickets below the cost of operation and expect to last long in the market. Are your operations being subsidized and by who? If you are not enjoying a subsidy and the price of aviation fuel continue to soar, some airlines will either ground their operations or are forced to merge with others,” an insider told THISDAY.
THISDAY
