NCAA: Aviation Sector in Crisis, Dollar Scarcity, Weakening Naira Impacting Operations - THISDAY
JULY 29, 2022
* Says financial health of some airlines not sustainable
BY Emmanuel Addeh in Abuja
The Nigerian Civil Aviation Authority (NCAA), yesterday said with rising dollar scarcity, weakening value of the naira against the dollar as well as the rocketing price of jet-A1, the industry is currently experiencing a full blown crisis.
Describing the problem as ‘horrible’, the Director General of the NCAA, Capt. Musa Nuhu, who spoke on the state-run television station, NTA, noted that the triple challenges have combined to throw the sector into some form of instability. Aviation fuel is currently selling at about N1000, while the cost of operations in the sector has generally climbed in recent months, resulting in a massive rise in the cost of flight tickets.
“We indeed have a crisis. And now first of all, it’s about the scarcity and unavailability of jet -A1 which is a significant component of the direct operating costs of any airline. “The increase in price is about five times over what it was less than a year ago. And to compound matters, not only the scarcity of foreign exchange, but the exchange rate itself has deteriorated significantly, doubling the cost of the airlines operations in terms of maintenance, training of pilots, buying spare parts and the purchase of fuel,” he stated.
Nuhu added that due to the crisis in Ukraine and Russia, the international price of jet A1 has increased significantly and at the same time , the value of the naira has decreased significantly , while the dollar has been getting stronger, creating multiple jeopardies. According to him, with the current situation, the NCAA has begun an audit of some of the airlines, noting that the health of the airlines was not sustainable if things continue as they are.
“Indeed, we do have a serious crisis. We’ve started the financial and economic health audit of some couple of airlines and what I can say is that it’s not sustainable. “A significant amount of money is wiped out just getting jet-A1 to fuel the airlines. Unfortunately, flight delays cancellations come when an airline goes or takes hours to negotiate (for fuel). And some of the airlines because of previous debt, they have the fuel suppliers asking for cash payment. “So, if you’re operating a flight, you have to cough out N5 million depending on how much you have to pay for supplies in cash for fuel. So, all these contribute to making an already bad situation worse,” he pointed out.
He stated that for the NCAA, the situation has increased the amount of work it has to do because it has had to continue to mount heightened surveillance and ensure that despite the difficulties, airlines comply with the rules and regulations. “So, it’s not the best situation, but we can assure the traveling public that we’re doing our best to work with the airlines to ensure the continued safe operations of all flights. “Over the last couple of years, due to some challenges and some difficulties we’re having in land transportation, aviation has become the preferred means of transportation.
“Aviation sector has become more particularly critical than what it used to be to the economy and with the difficulties the airlines have, it (shutdown of multiple airlines) is going to have a significant impact on economic activities,” he added. Stressing that aviation globally remains a catalyst for economic growth and development, Nuhu said that there has be collaboration of all actors in the sector to find a solution to the crisis. “It’s going to have a negative impact if we have to shut them down due to their inability to continue operating safely because of the difficult situations they have. It is going to have a significant negative impact on the economy. “People can’t travel, businesses will be affected, goods and services cannot be transported. We’re all in this together, including the government, the agencies, the industry,” he explained.
Recently, he recalled that the NCAA had to suspend the operations of Dana Air because it saw the fragile financial stability of the company which could have an impact on safety was unsustainable. “So it’s not the best situation. In fact, it’s a horrible situation we find ourselves in but I keep saying we will keep doing our best to ensure the safety of travellers and sometimes we may take decisions that are not very palatable to the traveling public, but priority for us is safety. “But also, aviation is business, it is a catalyst for economic growth. So we just have to find a solution to get out of the conundrum the sector finds itself,” he noted. Also speaking, a former Managing Director of the Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi, aligned with Nuhu on the cost of fuel, stressing that it has increased by at least five times in the last 24 months.
“The margins airlines have is less than five per cent of their total. So if you’re talking about a situation where fuel, a component that is about maybe 40 per cent or 50 per cent of your cost having gone up, there’s no way you can look at an airline and sustain the same pricing for airline tickets. “So it is impossible to sustain what airlines have been doing over the years. So invariably, what we have now is a situation where it’s been compounded by the fact that there’s a scarcity of foreign exchange for airlines to be able to acquire spares to maintain their operation safely. “So with all of these factors, it’s become very important that airlines actually review their pricing to indicate the current trends. There’s no way they can sustain fares that are below cost, you must produce at a particular cost. And for you to stay in business, it has to be cost plus profit,” he noted.