DECEMBER 28, 2022

BY Leah Nylen and Ryan Beene, Bloomberg News

(Bloomberg) -- Southwest Airlines Co. canceled almost two-thirds of its flights Tuesday, still hobbled by a massive winter storm that most major rivals were able to recover from with greater ease.

The chaos will prove costly to the airline, with Citi analysts estimating it could shave 3% to 5% from Southwest’s fourth-quarter earnings. There’s a reputational cost as well, with angry travelers stranded over the holiday season and the airline having to apologize, much as it did in a similar collapse after storms in October 2021.

The performance left Southwest as an outlier in the industry, with United Airlines Holdings Inc., Delta Air Lines Inc., American Airlines Group Inc. and JetBlue Airways Corp. all reporting no more than 2% of their flights canceled on Tuesday. The US Department of Transportation said it was concerned by Southwest’s “unacceptable” rate of cancellations and will investigate reports of a lack of prompt customer service.

“We expect Southwest to call out the impact as it was worse than the industry and likely hurt earnings more than a ‘normal’ storm,” Cowen Inc. analysts led by Helane Becker said in a research note Tuesday. “Southwest had the worst performance in the group.” Rivals had manageable cancellations and “appear to have recovered” in time to get travelers home, the note said.

Dallas-based Southwest’s shares declined as much as 6.8% Tuesday, while United, American and Delta fell less than 2%.

Southwest offered its “heartfelt apologies” Tuesday afternoon and said the widespread disruptions were “unacceptable.” The company plans to operate about one-third of its schedule for the next several days to allow crews to get into the right positions.

Southwest canceled 2,596 flights as of 3:33 p.m. in New York on Tuesday. It canceled 2,909 flights, or 71% of its schedule, on Monday and 42% on Sunday, according to flight tracker FlightAware.com.

There’s little relief in sight, with 62% of Southwest’s schedule canceled for Wednesday and at least 20% for Thursday — making it difficult to rebook stranded travelers.

The Department of Transportation said it would examine whether the cancellations were controllable and if the company is complying with its customer service plan.

US President Joe Biden weighed in with a tweet as well on Tuesday, noting the thousands of airline cancellations over the holidays without singling out Southwest by name. “Our administration is working to ensure airlines are held accountable,” Biden wrote, referring passengers to a DOT dashboard to see whether they’re entitled to compensation.

Southwest said that although the airline was fully staffed for the holiday, 23 out of its 25 top airports were affected by the storm that pummeled much of the US Northeast and left record snow totals in the Midwest. The airline is the biggest carrier serving Buffalo, New York, the hardest-hit urban area in the storm’s path.

“With consecutive days of extreme winter weather across our network behind us, continuing challenges are impacting our customers and employees in a significant way that is unacceptable,” the airline said in a statement. The storm “forced daily changes to our flight schedule at a volume and magnitude that still has the tools our teams use to recover the airline operating at capacity.”

Online, travelers vented about the turmoil, whose arrival in the midst of a busy holiday punctuated a dismal year for the US airline industry. With Southwest’s stock down 16% this year through Dec. 23, the stock is headed toward a third straight annual decline, the worst such run since a similar stretch that ended in 2008. 

Unlike competitors that use a so-called hub-and-spoke system to funnel passengers to large airports, Southwest is focused on point-to-point service, flying the same aircraft — Boeing Co. 737s — on trips that may hopscotch around the US.

While that accounted for part of Monday’s upheaval, FlightAware data showed struggles in cities where Southwest has major operations, including Dallas, Phoenix and Las Vegas.

Entitled to Refunds

Ryan Green, Southwest’s chief commercial officer, told the Wall Street Journal that the airline is taking steps like covering customers’ reasonable travel costs — including hotels, rental cars and tickets on other airlines, and will be communicating the process for customers to have expenses reimbursed.

People whose flights have been canceled are entitled to refunds if they opt not to travel, Green was quoted as saying.

The tumult evoked memories of tie-ups at Southwest and other airlines. Southwest blamed a worker shortage, an air-traffic control interruption and bad weather for a four-day disruption that erased 3,100 flights in late 2021. In 2007, JetBlue cut 1,102 flights over six days — almost a third of its schedule — after a Valentine’s Day ice storm.

(Updates with Biden comment and updates stock and cancellation figures.)

DECEMBER 28, 2022

By Sami Tunji

The average cost of airplane tickets in Nigeria rose from N37,022.97 in November 2021 to N73,267.57 in November 2022, latest data from the National Bureau of Statistics showed on Monday.

This represents an increase of 97.09 per cent, according to the NBS’ Transport Fare Watch report for November 2022.

The report also showed that that the average price of a single flight ticket increased by 0.09 per cent from N73,198.65 in October to N73,267.57 in November, 2022.

The NBS report read in part, “In air travels fare, the average fare paid by air passengers for specified routes single journey, increased by 0.09 per cent on a month-on-month from N73,198.65 in October 2022 to N73,267.57 in November 2022.

“On a year-on-year, the fare rose by 97.90 per cent from N37,022.97 in November 2021.”

It also disclosed the states with the highest average prices of airplane tickets on a single journey, and they included Taraba (N77,100), Delta (N76,500) as well as Bayelsa and Oyo with N76,100 each.

The states with the lowest prices were Niger (N67,100), Gombe (N70,000) and Nasarawa (N70,100).

The report also disclosed that the average fare paid by commuters for bus journeys within the city per drop increased by 0.12 per cent in November 2022 on a month-on-month from N636.30 in October 2022 to N637.10.

According to the NBS, on a year-on-year basis, however, the average fare paid by commuters for bus journeys within the city per drop rose by 42.69 per cent from N446.50 recorded in November 2021.

The report also said the average fare paid by commuters for bus journey intercity per drop rose to N3,848.48 in November 2022.

This was an increase of 0.07 per cent on a month-on-month compared to the value of N3,845.81 in October 2022.

NBS said on a year-on-year basis, the fares rose by 45.53 per cent from N2,644.50 in November 2021.

The PUNCH had recently reported that a spike in the cost of transportation amid the rising subsidy costs.

In The PUNCH report, it was noted that the average cost of bus transportation within Nigerian cities rose from N122.83 in January 2017 to N470.83 in December 2021.

This means that the cost of intra-city bus transportation has risen by 283 per cent in four years.

 Like the cost of bus transportation, the cost of fuel subsidy has also been increasing.

In 2017, the Nigerian National Petroleum Corporation said that it spent N144.53bn in subsidising premium motor spirit.

In 2021, the NNPC said fuel subsidy gulped N1.43tn, although there was no record for under-recovery in January.

Within the four-year period under review, the cost of fuel subsidy rose by 889.41 per cent.

Economic and energy experts have continued to decry the rising cost of fuel subsidy to the Federal Government.

DECEMBER 28, 2022

(Bloomberg) -- The deep freeze that blanketed most of the US in the past few days killed dozens and temporarily plunged millions into darkness. Yet the country narrowly escaped an even worse calamity as natural gas and power supplies buckled across several states, laying bare just how vulnerable the electric grid has become to a full-on catastrophe.

The storm evoked memories of deadly 2021 winter blast that caused widespread blackouts in Texas. But while that system hit a region unaccustomed to extreme cold, this one spread across the Midwest and Northeast — two areas that should be well-prepared. The fact that they weren’t highlights the flaws of a system that’s facing limited natural gas supplies and the unpredictability of solar and wind power.

“These cold fronts expose the fragility of our energy systems,” said Michael Webber, an energy resources professor at the University of Texas in Austin. “Though the variability of wind and solar are well known and discussed a lot, these freezes also show the flimsiness of the gas system.”

Supplies of natural gas, the nation’s primary heating and power-generation fuel, plunged the most in more than a decade as wells froze and pipelines failed, sending prices skyrocketing. The nation’s largest power grid was on the brink of forced rotating outages, while power was knocked out at least briefly to some customers in at least 24 states. Storm-related deaths reached at least 27 in Buffalo, New York.

Massive Storm

It was the sheer size and scale of the storm that made it so unusual, along with temperatures as cold as minus 50F (-46C) in some places. An extreme dive by the jet stream across North America drove the wedge of cold air across a huge swath of the country. With cold blasting so much of the nation at once, power grids weren’t able to rely as much on neighboring systems to help bolster supplies. It’s the kind of event that could become more common — sharp kinks in the jet streams are a hallmark of the changing climate.

On Dec. 23, US natural gas production suffered its worst one-day decline in more than a decade, with roughly 10% of supplies wiped out because of wells freeze-offs. Output was as low as 84.2 billion cubic feet on Saturday, a 16% decline from typical levels, before a slow recovery started, according to BloombergNEF data based on pipeline schedules.

That means suppliers were relying heavily on inventories of gas held in salt caverns and depleted aquifers to keep up with demand, which climbed to as high 144 billion cubic feet on Friday.  

Most of the output loss was seen in the Northeastern Appalachia basin, where supplies plunged to the lowest level since 2018. US natural gas futures posted gains on Tuesday as supplies remained severely constrained by freeze-offs.

Pipeline Problems

Supplies from Appalachia to the Tennessee Valley and the Midwest more than halved from typical levels, according to pipeline flow data compiled by BloombergNEF. Issues were exacerbated by mechanical problems at pipeline infrastructure, including at a compressor station in Ohio operated by Enbridge Inc.’s Texas Eastern Transmission Co., which invoked force majeure on some gas supplies. The Tennessee Valley Authority, a federally owned power provider to several southern states, and Duke Energy were forced to order rolling blackouts to conserve energy.

On Friday, physical deliveries of gas at a hub supplying the Carolinas and Virginia traded at $60 per million British thermal units, up nearly 650% from only two days earlier. That’s also more than 8 times the price for gas delivered into the Henry Hub in Louisiana, the US benchmark. By Saturday, gas topped $100 in Washington and parts of New England.

PJM Interconnection LLC, the largest US grid operator with lines spanning Illinois to New Jersey, declared a rare emergency on Christmas eve, requiring some of its 65 million customers to curtail demand while warning for the possibility of rotating outages. The grid also appealed to households to conserve over the weekend. In Texas, the Energy Department granted an emergency waiver to allow power plants to keep running without violating emissions limit.

This is the the third winter in a row that freeze-offs caused natural gas production to drop at least 8 billion cubic feet a day, underscoring the increased frequency of output-disrupting storms.  

Natural gas is now the leading power-plant fuel, overtaking coal thanks to the shale boom that kicked off more than a decade ago. The fuel was so expensive that New England was relying on oil for up to 40% of its power over the long Christmas holiday weekend.

System-wide impacts for natural gas and electricity are “making it difficult to dismiss February 2021’s Winter Storm Uri as a one-off event,” said Eli Rubin, an analyst at EBW AnalyticsGroup.

(Adds trading for natural gas futures in eighth paragraph. An earlier version corrected the penutlimate paragraph to show New England was relying on oil.)

DECEMBER 28, 2022

(Bloomberg) -- A glitch in OR Tambo International Airport’s fuel-supply system resulted in major flight delays at South Africa’s busiest airport. 

The airport in Johannesburg has been “experiencing challenges with fuel supply from its fuel storage facility to the main hydrant system,” Airports Company South Africa said in a post on Twitter on Wednesday. “Technicians are onsite and have resolved the issue.”

Both international and local flights were delayed because of the technical fault, according to the statement. The airport handles 21 million passengers a year and facilitates 53 aircraft movements every hour, according to data on the company’s website.

DECEMBER 29, 2022

Airline operators in the country have called for infrastructural upgrades and extension of operating hours at Lagos and Abuja airports, to reduce bottlenecks and under-utlisation of assets in the sector.

The two facilities, especially Lagos domestic terminals where almost all airlines start daily operations, have perennially slowed passenger facilitation during the morning peak periods, with spiral effects on the entire network and attendant under-utilisation of operating aircraft.

Besides the Murtala Muhammed Airport II (MMA2) terminal that has multiple boarding gates, the General Aviation Terminal (GAT), used by Air Peace, Arik Air, Green Africa among others, has only two gates.

The Guardian earlier reported that gross under-utilisation of commercial airplanes in the country cost local carriers as much as N4.3 billion per plane yearly. The conservative estimate, made by airline operators, was identified as one of the reasons local carriers perpetually struggle and are always on the verge of collapse.

Chairman West-Link Airlines, Capt. Ibrahim Mshelia, yesterday, said there is no reason for the airport managers to keep welcoming new airlines without expanding available infrastructure to meet their growing needs.

Mshelia narrated that airlines like Arik, Air Peace, Ibom Air, Aero, and Dana Air, on a 7 o’clock departure schedule, would cumulatively have about 600 passengers to process.

“Because of the infrastructure challenge, it takes you five minutes to check–in each passenger. Even if you reduce it to two minutes per passenger, how many counters would you need to be able to check-in those people within the two-hour window that the airline has? It is a lot!

“If you (airline) have no space, then you will have congestion, then chaos and then commotion at the end. So, you have issues with passenger delay, sorting baggage, access to the tarmac, moving bags, number of vehicles that can do it and so on.

“There are so many things that are dependent on the infrastructure that we are talking about. There is infrastructure but the capacity of airlines has overwhelmed it and one wonders why all these years nothing was done to expand it until only recently that they are doing some expansion,” he said.

Mshelia added that the immediate solution is to expand the space at Abuja airport and extend operating hours in Lagos vis-à-vis the rehabilitated Runway18 Left.

“Between these two airports, to be frank, there is no problem with daylight operations. So, the quick fix is to open up the entire airport to midnight services. If you do so, the airlines will naturally adjust their schedules and give space, it would naturally mitigate this without doing anything to the current infrastructure.

If you open the airport to close at midnight, you have solved a lot of the problems already, and in Abuja, open up the old international terminal that is not being used,” he said.

Chief Executive Officer of Ibom Air, George Uriesi, earlier said that the odds are stacked against local airlines, due to the “Nigerian conundrum”.

Uriesi noted that the Nigerian airlines use the same aeroplane as everyone in the world but because the operator is from Nigeria, he pays higher acquisition cost, higher cost of insurance that is three times more than in Europe, North America and Asia, uses weak naira to pay in dollars and so on.

“On top of it all, you are operating in a systemically limiting environment that makes it harder for you to be as productive as your colleagues in Europe, Asia and North America.”

He added that the sunset airport phenomenon (across most airports nationwide) is a strange one because it is one of the limiters to aircraft utilisation. Most of the sunset airports are declared operational from 6am or 7am to 6pm or 8pm.

“What is strange is that all of them, from the information declared, have Navigational and visual aids, CAT 1 or 2 Instrument Landing Systems (ILSs) and with runway lighting,” he said.