Airlines get lifeline to import jet-A1

By ADEBAYO OBAJEMU

Reprieve may have come the way of airlines and the flying public with the approval of one of its major demands by the government to avoid a shut down of their operations or raise fares to N120000 per one hours trip. Marathon meetings had been going on involving the National Assembly and stakeholders since the airlines made the threat to avoid a disruption of operations.

In a manner unprecedented, airlines in the country recently announced a 100 percent increase in airfare tickets amid pervasive high cost of aviation fuel, and low number of aircraft in operation, a development that has caused slight disruption in the critical sector. Before the hike in February, an hour trip was N32000 but the spike took it to N50,000.

Public outrage and protestations greeted to increase by airlines over rising costs, prompting intervention by the Federal Consumer Protection Commission, FCPC, which purportedly rejected the price adjustment by airlines, alleging monopolistic and antitrust and competition practices. However, the Ukraine war led to an astronomical rise in oil prices from about $70 per barrel to over $120, and drove diesel and aviation fuel or Jet A1 from N230 to almost N700 per litre.

This forced the airlines to threatened to either shut down operations altogether or fares would be doubled to allow them continue to function. Indeed, the Nigerian Civil Aviation Authority, NCAA, Director General without reducing the cost of diesel or allow airlines to raise fares to cut their costs, the airlines nay be grounded to avoiding compromising safety standards to avoid mishaps.

Air transport, which is normally viewed as an elite form of transportation is tearing at its seams, and this is especially frightening for the rich and the upper middle class who primarily constitute the largest number of passengers using airlines, but more people are now using it given the insecurity and stress associated with road transport.

The Airlines Operators of Nigeria, AON, in a meeting with the House of Reps cited unavailability and the ever-rising cost of aviation fuel (Jet A1); unavailability of forex for spare parts and maintenance; delays from Customs in the clearing of safety-critical spare parts; poor air traffic flow and inadequate check-in counters as the reason for the recently announced spike. Lagos-Abuja route, which is widely seen as the busiest route will go for N120,000 one way. About three weeks ago, the same route went for less than N55,000.

An insider in one of the airlines told BusinessHallmark that “it is probable, I mean highly probable, that in a couple of days if the situation is not addressed, passengers may pay as much as N80,000 to N100,000 for a one-way economy seat if they are booking on the day of travel.”

This is a difficult time for passengers in the aviation sector. The 100 percent hike comes barely less than 12 days when the airline operators in Nigeria warned that the skyrocketing price of aviation fuel by over 200% to about N600 per litre within a year, would lead to a spike in the price of tickets in order to sustain their operations.

According to BusinessHallmark checks, the price of aviation fuel skyrocketed to between N420 to N650 per litre penultimate Sunday depending on the city, as against the N400 per litre it was penultimate Thursday, without any notice to the airlines, with the NNPC Ltd promising a N500 per litre, while airlines insist on N400 or nothing.

For the past few weeks passengers have been groaning over the high cost of these airfares, describing the hike as too exorbitant and seeking for government intervention and a downward review. Recall that the National Assembly intervened two weeks ago, through a visit by the relevant joint committees to Group managing director of NNPC, but the later said there was nothing he could do, since it was simply a demand and supply issue.

Airlines position

The airline operators under the aegis of Airline Operators of Nigeria (AON), in a statement issued about the spike mentioned some of the operational challenges responsible for flight delays and cancellations to include but not limited to unavailability of aviation fuel (Jet A1), the ever-rising cost of aviation fuel and unavailability of forex for spare parts and maintenance.

Other factors fingered include delays from Customs in the clearing of safety-critical spare parts, poor air traffic flow and inadequate check-in counters.

BusinessHallmark’s findings revealed Azman Air and Max Air’s fares for Sunday is N50,000. Ibom Air’s fare is N53,000, while Arik Air, Air Peace and Dana Air fixed above N50,000 for an economy seat. Also, flights from Lagos to Port Harcourt have been pegged at N50,750 for United Nigeria, N50,000 for Air Peace and N50,250 for Arik Air.

Azman Air in a statement on its Twitter account said that they had no choice but to spike up airfares if they are to remain in business and provide safe and reliable services, adding that they have been hampered by hike in prices of aviation-related materials, services and foreign exchange.

The airline said, ‘’The increase in ticket fares is never with the intention of hurting or extorting but for us to stay afloat in the provision of safe and reliable flight experience to our passengers. The review became necessary due to hike in prices of aviation-related materials, services and FOREX.’’

Analysts have also said the monumental spike cannot be divorced from recent hike in price of aviation fuel and the slide in foreign exchange rate.

Managing Director of Aero Contractors, Capt. Mahmoud Abdullahi, who said that airfare hike was overdue, maintained that the fuel price kept increasing while some service providers had increased their tariff by more than 250 per cent.

“The airline fare hike is long overdue, as you are aware of the increase in the fuel price and forex. Additionally, the service providers (Sahcol and Nahco) increased their tariff by 250 to 300 per cent; at the international airport, it is even 500 per cent increase.

“Fares that you see now have always been in the airlines inventory. What airlines do is to close lower bucket fare and open next fare bucket, but those lower fares are still in airlines inventory, “ he said.

According to Abdullahi, though airlines may experience low patronage, they have to survive. The managing director said that every move by the airline was in the interest of safety. He pointed out that airline income was in naira while most of their expenditure was in forex.

“Regulators play a very good role in pricing. If an airline prices its ticket so low, regulators have to investigate to find out how this airline can meet its obligations with the price that it is charging.

“They have to make sure the airline does not cut corners on maintenance,“ he said.
Abdullahi explained that no airline would intentionally delay or cancel flights, but due to variables including; weather, technical, airport facilities, sunset airport among others.

According to NAN, Azman General Manager, Mr. Suleiman Lawan, said that it had reached a time when the airfares could no longer remain the same as they used to be. According to him, aircraft handling is different from other transportation systems. He noted that tickets prices started from N27,500 up to N35,000 before it was increased to minimum of N50, 000.

“Everyday you have to plan for importing spare parts, which is in USD and you cannot get such money from the government. It’s only from the parallel market. Also A-jet fuel is in the higher price.

“Handlers have increased their charges, even the government has increased its charges. So, based on the above explanation how can airlines survive the situation.

“Apart from that, they have so many responsibilities to handle, such as; payments of salaries, aircraft checks out of Nigeria, which they have to get the money from the same parallel market,“ he said.

Lawan urged the government to assist airlines in some responsibilities. According to him, the airlines are looking for the way to have a breakthrough not even making profits.

The Max Air Executive Director, Mr. Harish Manwani said the airlines ought to increase the fare to cope with the daily expenses to survive.
The executive director noted that Max Air hardly delayed or cancelled flights except for extra ordinary weather conditions.

“Even with low turnout, the airline has its flights flown the routes across the country,“ he said.
An Aviation Expert, Group Capt. John Ojikutu rtd, urged the public and the responsible authorities to have interest in the airlines` makeup areas for the sustenance of their operations.

Ojikutu said he had expected the hike in the airfare about 10 years ago. “Selling air ticket at a naira rate less than $100 for a flight of one hour makes no economic sense in Nigeria where over 20 years ago $100 was the fare.

“Aviation fuel was being refined in the country around 1999, whereas today we have been importing fuel for well over 10 years.

“Naira exchange has grown steadily from N180 to N360, N400, and now over N500 to a dollar and our airlines are selling tickets at N26,000 or in rare cases N30,000 even when we are importing fuel,“ he said.

Some air travelers at Nnamdi Azikiwe International Airport (NAIA), who also spoke with NAN, appealed to the Federal Government to intervene on the recent increased of air fares.

According to them, the Nigeria Civil Aviation Authority (NCAA) is responsible for approving the tariffs of fares on the tickets of each operator submitted to it after due consideration.

“That include the airlines operators, airports operator (FAAN) ground handling companies, among others. Determining the cost of fares and charges by operators is the designated responsibility of NCAA..

The Executive Vice-Chairman/Chief Executive Officer of the Federal Competition and Consumer Protection Commission, Babatunde Irukera, said in Abuja during the inauguration of a joint technical committee by the FCCPC and NCAA to address consumers’ complaints in the aviation sector.

“It appears to be a coordinated conduct, how do we address what is becoming more incessant from a delay and cancellation standpoint to the level of responsiveness and sensitivity the airlines show when unavoidable or permissible delays or cancellations occur?” he said.

“And more recently, what appears to be a coordinated conduct in restraint of competition and completely distorting a market that has become the vital backbone to the nation. These are really serious issues.”

However, by weekend after several days of meeting with a joint committee of National Assembly, the AON announced its decision to rescind the proposed withdrawal of services if nothing was done to reduce the cost and access to jet fuel following approval by the NNPC Ltd to grant license to the airlines to import aviation fuel, instead of depending on marketers.