Domestic airlines face collapse over high operating costs, low patronage

AYOOLA OLAOLUWA

Domestic airlines operating in the country are facing bleak future and shut down operations over low patronage occasioned by travellers’ growing resort to cheaper transport means and cutting travel frequencies, Business Hallmark can report.

The development, worried airline operators said, could lead to the shutdown of operations from 2024 if not urgently addressed.

The National Bureau of Statistics (NBS) had in its September 2023 Transport Fare Watch released last week, put average price of air travel in the month of September at N79,013.48.

According to the NBS, the price is the same between August and September 2023.

“In air travel, the average fare paid by air passengers for specified routes single journey was N79,013.48 in September 2023, showing no significant differences in the fare paid in the previous month.

“On a year-on-year basis, the fare rose by 8.70 per cent from N72,690.54 in September 2022”, the bureau had stated.

However, checks by BH from Monday, October 30 to Friday, November 3, 2023, showed that the average airfare for a single trip from Abuja to Lagos is over N105,000. The same situation applied on other routes, with a one-way Lagos – Kano ticket selling for as much as N183,275

Faced with soaring operational costs, including increase in the pump price of aviation fuel, forex induced inflation in the prices of maintenance parts, multiple taxation and many other challenges, airlines’ managements had resorted to raising airfares to absorb and cover operational expenses.

Also, as part of strategies to increase revenue, domestic airlines in the middle of October increased the number of flight seats on their aircraft to allow for more passengers.

Announcing the takeoff of the plan in Lagos, President of the National Association of Nigeria Travel Agencies (NANTA), Susan Akporiaye, said it was part of strategies employed by airline owners to increase the capacity of their airlines amid dwindling revenue.

“Nothing has changed in the operating costs yet due to the fluctuating exchange rate, which is affecting our operating costs. The only thing that has changed is that airlines are beginning to release the lower seats now. Some of them have started releasing lower seats.

“Earlier, the airlines stopped selling off all the cheap classes and were only selling the expensive ones. The airlines had cut off all the cheap seats and were selling only the expensive ones because of the trapped fund issue but now that the rate of exchange is high, most of them are releasing the cheap seats to get more revenue to remain afloat in the business”, explained Akporiaye.

However, the decision by airline owners to constantly review upward the prices of its tickets has prompted many Nigerians to adopt several cost-saving measures, including cutting down on travel frequencies and embracing cheaper travel options.

Some of the travel options, BH findings revealed, include traveling by road and rail.

It was reliably gathered that many companies and individuals had in the last three months drastically cut down on air travels to save cost.

A leading traveling agency in Ikeja, Lagos, recently decided to convey members of staff to its annual retreat held in Akure through road.

“Our chairman is from Ondo State and he normally take the company’s yearly retreat to Akure to promote his home state.

“Last year, he struggled to convey the over 100 participants to Akure by air, paying N140,000 on each participant’s return ticket. Air tickets alone cost the company about N16 million to ferry her workers to and from Abuja. In all, over N25 million was spent on the retreat.

“This year, however, the management decided to award the ferrying of staff to a popular transport company, which took the workers to Akure and back to Lagos at the end of the 3-day event.

“I learnt it cost the company about N5.2million for the two way trip. The sum of N40,000 each was paid for the 110 passengers, totalling N4.4million, while the balance of N800,000 was for the 20 mobile policemen that escorted the workers to Akure and back”, a manager in the company, who did not want his identity revealed confided in our correspondent.

He added that the company’s management is considering changing venue for subsequent meetings.

“While at the retreat, the management discussed the possibility of holding subsequent retreats in Lagos if the situation did not improve soon”, he added.

Several other companies, it was learnt, are also adopting ingenious means of circumventing the rising costs of flying. A branch manager of an insurance company based in Lagos, who demanded to be identified only by his first name, Chuka, told our correspondent that his firm decided to use train to convey selected staff to its biannual workshop, which held in Ibadan last week.

The possibility of using train to convey staff to Ibadan was discussed at the planning committee’s meeting in May.

“A sub committee was then set up to work our the modalities. The committee met with the management of the Nigerian Railway Service (NRC), which agreed to release two coaches to convey our members to and from Ibadan at a much reduced price of only 30%, when compared to what it would have cost the comply flying.

“It was an eye opener to everyone as the journey turned out to be more of an adventure and sightseeing, which is not possible while flying, despite costing the company less to undertake”, Chuka enthused.

Apart from embracing alternative means of transportation, many Nigerians, both individuals and business concerns, have also cut down on journeys, limiting it to only the most essential ones.

“In 2021, I travelled, at least, twice a month. It reduced to only 11 trips in 2022. We are in November already, and I have only travelled twice this year.

“When I applied to travel to Port Harcourt in September for a business trip, I was informed by the management that they won’t be able to approve my request as the bill was too much for the company to bear.

“At the end of the day, the job was given out to a freelancer in Port Harcourt, who carried out the assignment for just N100,000.

“Meanwhile, if a staff of the company had gone to Port Harcourt from Lagos, he would have spent over N500,000 in air travel, hotel accommodation, local shuttle, feeding and allowances”, said Dele Awopetu, a lawyer in a legal firm in Lagos.

While Nigerians are happily discovering and savouring the advantages of adopting other means of transportation apart from air travels and are daily embracing them, airlines are counting their losses, as less passengers means lower revenue for them.

Troubled by the trend, airlines operators have cried out for government’s intervention, warning that most of them will soon go out of business if help does not come quickly enough to cushion effects of high operating costs in the aviation industry.

Particularly, the operators blamed the high exchange rate of the naira to dollar, which they lamented had crossed the N1,000/$1 mark.

Speaking on the plight of local airlines, the Managing Director of Aero Contractors, Captain Ado Sanusi, said some airlines may close shop from March 2024 and filled for bankruptcy if the tide fails to turn.

The Aero Contractors boss said the saving grace for airlines is the coming Christmas and New Year season when many will embark on journeys, especially air travels.

“Some domestic airlines will go under by March next year. There will be reduction in the number of airlines. So, some airlines will fall by the side, if government does not give reasonable assistance to the operators.

“This is because the cost of operation has continued to increase. Jet A1 is now N1,100 per litre. The major challenge is that we don’t manufacture any aircraft spares in Nigeria; so, the moment the value of dollar increases against Naira, the cost of spares increases”.

While disagreeing with the projected drop in revenue as a result of a drastic reduction of passenger traffic, Sanusi insisted that most air passengers will still be able to afford the high cost of ticket.

He, however, agreed that there could be a downward adjustment in the frequency of air travels by passengers.

Also speaking, the spokesman of Airline Operators of Nigeria (AON), Professor Obiora Okonkwo, lamented that the rapid devaluation of the naira against the dollar has negatively affected aviation business.

According to Okonkwo, who is also the Chairman/CEO of United Nigeria Airlines, the Federal Government must quickly intervene in the sector by either providing aviation fuel to airlines at subsidized rates, or provide airlines access to dollar at lower rate to forestall the imminent collapse of the industry.

“There is a limit the fares can be affordable under prevailing circumstances. It will affect load factor if the fares continue to increase and when the load factor reduces, the airlines will begin to bear the loss and the airlines do not have the financial system that can endure such losses for a long time. The airline will not continue to operate at a loss; so, they will be forced to close down.

“Aviation is a catalyst to economic development in Nigeria and throughout the world. So, if airlines stop operation, it will affect other economic activities.

“The reason why government builds roads is to connect people from one place to another. That is also the reason airports are built, to connect people from one place to another by air.

“If flight service stops, it will affect the economy directly and indirectly. We have been speaking about this but we are yet to get positive response.

“We have been holding discussions with the Minister of Aviation and hopefully he will do something for the airlines”, the United Nigeria Airlines boss disclosed.