Aviation Fuel Crisis: Two Airlines Gone, More To Go Amid  Huge Investment Irony

Aviation Fuel Crisis: Two Airlines Gone, More To Go Amid  Huge Investment Irony

* Expert identifies weak corporate governance as problem of Airlines
* Air-peace, others raise flight fares

Airline operators have increased the prices of  flight tickets on domestic routes in response to the increasing price of Aviation fuel, Jet A1 which has increased fromN200 per litre in February,2022 to  between N720 and N800 per litre on Saturday,July 23, 2022.

Airline Operators  of Nigeria(AON) in a letter dated July 18,2022 written to the director general of  Nigerian Civil Aviation Authority(NCAA), they sought the approval of 40 per cent increase in fares, saying in addition to the crippling effect of the intermittent  shortages  of  Jet A1, the price of aviation fuel has increased by 300 per cent in a space of five months, emphasizing that  this has greatly increased the operational cost of airlines by 130 percent yet airlines are unable to increase fares even as they groan under the burden of scarcity of foreign exchange to conduct their operations.

Meanwhile, stakeholders in the aviation industry who spoke to MMS Plus are in support of the increase in fare citing economic realities as the basis even as some attribute the fuel crisis to global economic dynamics spurred by the Russian and Ukrainian war as well as a culture of bad management  and diversion of funds by airline operators in the industry.

The AON letter was yet to get the approval of NCAA when it directed  an graded increase of fare prices by almost 100 per cent on classes of flight tickets on Saturday.

Confirming the new prices, Air Peace in a letter to the general public said,”This is to notify you that the domestic fares have been reviewed  upward due to the current increase in the price of Jet- A1.

According to the statement, the new prices for business class are: N130,000 for J; N120,000 for C; and N110,000 for D; while the economy class rose from the benchmark price of N50,000 to N100,000 for W; N85,000 forY; amongst others.

AON had also written a public announcement dated July 22, informing  passengers of flight disruption  occasioned by acute shortage of aviation fuel.

According to the statement signed by AON spokesperson, Prof. Obiorah Okonkwo,” The Aviation sector has been hit by a major crisis with the acute scarcity  of aviation fuel.For this reason, there will be a major disruption in scheduled flight operations, including cancellation and unnecessary delays across airports in the country.”

Recall that in February 2022, airlines increased the base fare for economy flight tickets for domestic routes from about N35,000 to N50,000, citing high operational cost, a development that sparked  agitations from passengers and government agencies.

 Gradually, air transportation in Nigeria is rising beyond the reach of an average Nigerian who battles with disposal income and meager means of survival and the consequence could be decline in the percentage profile of air passengers, a dilemma that would further trigger another increase in price occasioned by low patronage to at least break even on each trip.

  Speaking with MMS Plus, the secretary general of Aviation Safety Round Table Initiative(ART), Group Capt. John Ojikutu(retd), said: “Writing NCAA is doing it the wrong way. And they will end up having problems with NCAA. Take your tariff to NCAA. How do you arrive at that 40 per cent? Is it by fuel? Is it by grand handling charges? Is it by bank charges or landing and parking charges? You must list them!  Grand handling for this type of aircraft, this is what we pay. Fuel, this is what we pay. What other charges do you pay to agencies, you add all those ones. Now, when they look at it they will compare it with other sectors and countries.

“ All these problems came up because NCAA itself has not been doing what we call economic auditing. It is the responsibility of NCAA to conduct it annually. The one they are just trying to do on Dana Airline now needed to have been done last year. But they have not done it to any airline.

“If you are doing it for the first year and it is like that you just find a way to look at it properly and give concession. But the airline is owing and it has accumulated to three years and it is not owing because of increase in fuel. So how do you manage the situation under this condition that the fuel price has increased? Many of them are owing and I just think they should be able to clear their debts and go into bigger operations.

“One of them has just said they are parking up. Aero is gone, the other one going is Arik whether they mention it or not.  All these things did not start now. It started before COVID-19. They used COVID to cover up. After COVID, now they said it is fuel. Fuel did not just get to N800 per litre today. In 1999 when the civilian government came in it was about N100 to N120  and when it started increasing they should have known and I told them. When it was increasing and it was sold for N120 we were not refining fuel here; we were importing fuel. When we were refining fuel here ticket was N4000 and N40 to a dollar which was about a $100 . They started collecting $100 since 2000. And they were told in 1989-1990 to factor their tickets on dollar rates. How many of them did that? When they lose money they go to government for intervention and ask for all kinds of rebates instead of them to look into their business plan!

“What is our business plan for tomorrow in the face of the unchanging business climate? So, the  fuel price  increase was gradual . But along the line what are they doing? NCAA is  supposed to be looking into their  account every year. When Aero  and Arik  got N300 billion from both bank and government, how old were they? Arik  was  about four years old in operations and Aero was just two years after the British people left them. Suddenly, they are in huge debt,” Ojikutu stated.

What has remained a big irony is that while functional airlines are packing up as a result of huge debt and  investment -unfriendly  environment, many new investors are trooping into the sector.

Engr. Ronald  Ajiboye, an Aeroneutic Engineer and CEO of McRonald AutoDrone Centre Ltd, said, “The airline operators make an average of about $5 on each passenger. The cost incurred in running an airline include, the cost of fuel, maintenance  and operations. The cost of fuel and maintenance are the biggest cost. Looking at the implication, the government  cannot afford not to always intervene in the sector.

“Airlines have the responsibility of maintenaining aircrafts even when they are not making money or flying. They must meet the regulatory requirements meanwhile no subvention of any kind for them from anywhere. When you see some of them like Air Peace buy new aircrafts, they are probably going to make money in the next couple of years,” he noted.

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