March 06, (THEWILL) – The cost of Jet A1, otherwise known as aviation fuel, has remained a major challenge for airline operators in Nigeria. As of February 2021, aviation fuel was sold for N190 per litre. By February 2022, the price rose to N440 per litre at most airports across the country.
With the rapid fluctuation in the cost of aviation fuel, the industry has witnessed a lot of hiccups in the past year. For instance, when Jet A1 was sold for N190 a year ago, a flight ticket for a one-way economy trip cost N23,000. That has changed now.
Air Passengers To Pay More
With the current trend, there is an indication that before the current month (March 2022) runs out, the cost of Jet A1 might hit N500 per litre. The implication is that air passengers may be forced to pay more than the current N50,000 base cost of a one-way ticket due to increase in operational costs.
Suggesting a possible increase in the cost of flight tickets in the near future, the Vice-President of Airline Operators of Nigeria (AON), Mr Allen Onyema, has said that airlines get as small as less than N5, 000 in a single ticket purchase.
Noting that airline operators hardly make profit, Onyema said, “There are many factors responsible for the high cost of flight tickets. The cost of Jet A1 has risen by 200 per cent in one month. There is the issue of forex and the ground handling companies have also increased their charges.
“We get less than N5,000 from each ticket. The N50,000 is not even enough. Airline business is additive. It doesn’t give anybody money. Nigerians should not be envious of airline operators because it doesn’t give money as much,” Onyema explained.
Delays, Cancellations
Aside from the high cost of aviation fuel, operators have equally lamented the unavailability of the product, citing it as part of the causes of delays. For instance, Dana Air partly attributed the recent flight disruptions that it experienced to fuel scarcity.
Addressing the airline’s customers in a statement, Deputy CEO, Dana Air, Sukhjinder Mann said, “On fuel scarcity, we are working with our partners to significantly mitigate the challenge and I am pleased to announce that we have made major inroads in this area with our key suppliers. We will continue to do our best to minimise any foreseeable challenges while hoping that the situation improves generally for all carriers as soon as possible.
“I accept that our recent disruptions are due to ramp congestion, bad weather, and most recently, scarcity of fuel”, he said.
FG Probes Fare Hike
Already, the Federal Competition and Consumer Protection Commission (FCCPC), in collaboration with the Nigerian Civil Aviation Authority (NCAA), has commenced an investigation into the recent airfare increase by domestic airline operators in the country.
Condemning the increase of air fare to as high as N50, 000 for a one-way economy ticket, the Executive Vice Chairman and Chief Executive of the FCCPC, Mr Babatunde Irukera, said the action of the operators was in flagrant violation of Section 107 (1)(a) and Section 108 of the Federal Competition and Consumer Protection Act, 2018 ( FCCPA).
Irukera said, “Coordinated increase in airfares by certain scheduled operators Section 107 (1)(a) forbids competitors from fixing prices, and Section 108 prohibits any conspiracy, combination, agreement or arrangement between competitors in any manner that unduly restrains or injures competition.
According to him, the current Nigerian Civil Aviation Regulations Air Transport Economic Regulations 18.15.2 (i) and (iii) “prohibits airlines from engaging in any contract, arrangement, understanding, conspiracy or combination in restraint of competition which includes directly or indirectly fixing a charge, fee, rate, fare or tariff and any collusive action”.
But in a swift reaction, AON debunked the allegations by the FCCPA boss, stating that they never came together to fix fare prices.
Speaking through Onyema, AON stated, “AON never got together to increase airfares. We debunk that insinuation. The N50,000 fare had always been there. In December 2021, basic fares cost between N60,000 and N70,000. Airlines did not come together to decide that. It is a matter of unit cost per seat ,which is the basis of increase.”
Subsidy To The Rescue
Speaking recently on the effect of Jet A1 and forex, the Chairman, United Nigeria Airlines (UNA), Dr Obiora Okonkwo, said that high cost of fuel and forex adversely affect ticket prices, adding that what the airlines do as a way of cushioning the effect of the high cost of aviation fuel, is just to subsidise it for passengers.
Okonkwo said, “When aviation fuel was N190 per litre and the official rate of the naira to a dollar then was N340, but today, if forex is available, it is N450 thereabouts. When it is not available, in the alternative market the exchange rate is N570 to a dollar.
“But, it might surprise you to know that while over a year ago at the foreign exchange of N340,00, today, because of the market situation, you can still buy your ticket at N20,000 to N21,000. What this means is that as long as all the airlines are buying from the same market and selling tickets at the current rates, any ticket that you buy is being subsidised by the airlines”.
“Why did I say this? Aviation fuel, depending on the aircraft type you are flying, could take up to about 30 to 40 per cent of your cost components. As you know, for every ticket you sell, you have five per cent of Ticket Sales Charge (TSC) rendered to the Nigerian Civil Aviation Authority (NCAA). You have other deductions to the Nigerian Airspace Management Agency (NAMA), the Federal Airports Authority of Nigeria (FAAN) and to other airport owners. As a matter of fact, by the time you remove these deductions from the N20,000 that you charge, you have to use your money to take care of other operational needs”.
Anthony Awunor, is a business correspondent who holds a Bachelor of Arts Degree in Linguistics (UNILAG). He is also an alumnus of the Nigerian College of Aviation Technology (NCAT), Zaria Kaduna State. He lives in Lagos.
