Market News

As the summer holiday approaches, Air passengers are expected to experience an increase in airfares due to devaluation of Naira as well as appreciation of crude oil price which also affect the price of aviation fuel, Jet-A1.

Also, inability to access foreign exchange from the official market has also put pressure on airline operations, causing airfares to skyrocket.

Aviation experts have argued that recent appreciation of crude oil price to $74.10 per barrel in the world market, and Naira’s free-fall to N505/$1 may further escalate the prices of jet-A1 as the landing cost will increase.

It was gathered that there has been a steady increase in the price of aviation fuel in the sector since April till date.

For instance, in April 2021, the price was between N250 and N275 per litre, which was about 200 per cent increase to the N110 price in 2016.

Presently, the price of aviation fuel is as high as between N295 and N300, while the product can be purchased for N302 and above per litre in the northern part of Nigeria.

The difference in prices at various airports, it was learnt, is due to the additional haulage cost incurred from taking the product from Lagos seaports to the airports across the country.

Aside from the multiple taxes and charges on the product, the monopoly of marketers at less viable airports has also raised the price in these airports.

While the cost of transportation of aviation fuel within Lagos is about N3 per litre, it is about N15 per litre travelling up North, as far as Maiduguri.

Similarly, the federal government statutorily earns N2:50 fuel surcharge tax per litre. Also, marketers are made to pay for operators’ permits, ground rent for tank farms, and access permits for equipment into airports.

However, airfares are already hitting the roofs and are expected to rise further due to the increasing price of aviation fuel and naira devaluation.

For instance, early morning first flight from Lagos to Kaduna now cost as much as between N60,000 to N65,000, depending, however, on time of booking.

Also, one-way ticket from Lagos to Port Harcourt hovers between N50,000 to N55,000 while from Lagos to Sokoto is between N70,000 to N80,000 and Lagos to Yola is between N63,000 to N65,000.

Speaking on the development, the director of engineering, Ibom air, Mr Lookman Animashaun said, airline operators are presently operating at loss due to the hike in aviation fuel and forex scarcity.

According to him, passenger traffic is expected to drop as airline operators will soon increase fares to meet the present realities.

He said: “Presently, Jet-A1 is soaring and that hasn’t translated into an increase in airfare yet because airline operators are being careful not to effect any increment now.”

“But, truthfully, they are running at a loss and despite that, they are not increasing fares in order not to scare passengers away but with the way things are going presently, they will increase fares. The only thing that can stop the increment is if the government provides a sort of intervention. If not, they will hike the prices, and it will affect passenger traffic, but if we don’t want it to come to that, something tangible should be done to bring down the price,” he said.

Also speaking on the current high cost of Jet A1 fuel and its effect on airline operations, the executive chairman of United Nigeria Airline, Dr Obiora Okonkwo, said the current price of aviation fuel has made operations much more difficult at the current fare regime. 

“We started operations at N160 per litre barely four months ago and when you move from that price to over N270 within two months, you should expect whatever we are experiencing now in terms of high airfares.

“Aviation fuel alone takes between 30 and 40 per cent of airlines’ costs. This calls for grave concern to everyone,” Okonkwo added.

Speaking to LEADERSHIP, a member of the aviation safety round table, Olumide Ohunayo, said since aviation fuel is a major cost in the industry, the increase in price will surely affect price.

He noted that there has been no significant difference between the early booking and late booking as a result of the hike in fuel price.

“Hike in Jet-A1, forex scarcity and naira devaluation are reasons for the high cost of air fares we have now. In the past we used to have differences in fares for early booking but now the difference between early and late bookings is no more significant due to the cost of Jet-A1 and this affects cost of operations for carriers.”

“Fuel is a major cost, and if aviation fuel keeps increasing, the cost of tickets will increase. We have not been able to find a nexus to the aviation fuel issue because we do not refine fuel in Nigeria. All fuels are imported. We have advocated that the airline operators should be involved in bringing aviation fuel into the country or they belong to an association that will make them buy in bulk from marketers, but all our airlines do not buy in bulk but individually, and because of the bad payment in the past, they are forced to pay before delivery,” he added.

Speaking on forex scarcity, Ohunayo advocated special window for airline owners, saying this will ease pressure on operators.

“It is a problem that affects procurement of parts and other components in the industry and training. We have asked for a special window and we hope that a special window will be provided for the sector to get spare parts.

“As the naira is being devalued and since operators collect 99 percent of their revenue in naira, it affects the overall bottom line because they collect in naira and spend mostly in foreign currency, definitely prices of tickets will be affected,” he said.