Domestic airlines under the aegis of the Nigerian Airline Operators Association have warned that increased operational costs caused by aviation fuel price spikes, currency shortages, and other factors could push the base economy flight ticket above N100,000.
Professor Obiora Okonkwo, the spokesperson for local airlines and Chairman of United Airlines, revealed the information in an exclusive interview with The PUNCH on Wednesday in Abuja.
Apart from the persisting aviation price hike dilemma, the airline head claimed that due to a lack of appropriate supply from the Central Bank of Nigeria via commercial banks, domestic operators were forced to source foreign exchange from the parallel market at high rates.
As a result, he believes that if the current situation continues, all local airline operators will be forced to raise the base economy flight ticket price to at least N100,000.
“Obviously, it is unavoidable,” Okonkwo remarked. I can tell you that for the past three months, all airline operators have been losing money, a lot of money. The operational fronts are under too much strain to break even. Even if aviation fuel is made accessible, a review must be conducted to reflect the lowest possible operational cost. We are providing patriotic services to the country and recognize our importance. We are a part of Nigeria’s economic growth process, but it comes at a very high cost.”
“Nothing less than N100,000, between N100,000 and N120,000, even with Jet A1 fuel at N400 – N500,” he continued. That’s exactly it.”
He went on to say that talks with the CBN have yet to yield any meaningful results in terms of providing appropriate cash.
He also emphasized the need of the aviation industry being viewed as a critical service that deserves special treatment in financial problems.
Okonkwo stated that while the operators dislike raising rates, it has become necessary in order for them to avoid going out of business.
He added, “In the industry, it is expected that you will gain some here and lose some here but the biggest challenge indigenous operators are having is that the cost of everything is high. You source money from the commercial bank rates. You source money from the black market. No moratorium for your loans and the banks and AMCON are quick to jump on you.”
Corroborating this view, the Chief Operating Officer, Ibom Air, Mr. George Uriesi, said local airlines had reached a point in their operational cost whereby “something has to give in.”
Uriesi said, “Something has to give in. It’s either the prices of fuel that come down or the prices of airfares go up from where they are. So far, the airlines have tried very much to work within the airfares as they are. All sides of the divide are aware that the airlines have done the best that they can do.
“I don’t know what tomorrow holds but at some point, if the airline doesn’t survive, it goes down, to the detriment of everybody-the people who work for the airline, the people who fly on the airline, the country’s economy, everything goes down. So, airlines are just trying to be stable and patriotic. That’s where we are.
Uriesi, a former managing director of the Federal Airports Authority of Nigeria, said it was difficult to tell how long the local carriers would be able to continue with the high operational cost.
“It’s very hard to say, we are watching the business every day, we’re watching a number of parameters. We’re watching the load factor, we’re watching the yield per passenger, we are watching the cost of operating at the price we’re paying every day which keeps going up every few days. So, the truth from this is that, when it becomes clear that you will not be able to sustain yourself, then you’ll have to adjust some of your indices, always taking into consideration the ability of the passenger to pay because you can’t just raise prices just because fuel has gone up. If you issue what they can’t pay, then you will not carry anybody, you would have committed suicide.”
However, industry experts said the unfolding development would not augur well for the local airline industry, saying it could make its outlook bleaker.
“This is not a good sign for the domestic airline industry,” said Group Captain John Ojikutu (retd), CEO of Centurion Aviation Safety and Consult. We should consider why the four refineries have been idle for the past two decades. There should be no reason for the type of increase in aviation fuel prices we’re seeing if you have refineries and crude oil that you’re refining.
‘Even when the fuel returns to this country, we transport it via fuel tankers, whereas in other countries, it is transported via pipelines.”
Mr. Alex Nwuba, a former Managing Director of Associated Airlines, predicts a drop in passenger traffic if airfares rise too high.
He said, “We didn’t die when flights couldn’t operate during the COVID-19, people adapted so people will adapt. They may just have to forfeit some trips that are not important and focus on trips that are important. They could also decide to choose alternative methods of travel when the fares are too high.”
A former Director of Operations, IRS Airlines, Kenneth Wemambu, said, “Airlines have been losing money. A business person, if the cost of operation increases by over 200 per cent, you will need to avoid running the business. This is why the possibility of an airfare hike can’t be ruled out.
