Passengers dwindle as airlines spike fares

Though the Nigerian aviation industry had witnessed some huge progress in recent years in terms of improved safety standards and increased air travellers, the industry is headed towards collapsing if the rising cost of air fare is not arrested. For instance, the aviation industry’s contribution to Gross Domestic Product (GDP) of Nigeria, amounted to N7.370 […]

Though the Nigerian aviation industry had witnessed some huge progress in recent years in terms of improved safety standards and increased air travellers, the industry is headed towards collapsing if the rising cost of air fare is not arrested. For instance, the aviation industry’s contribution to Gross Domestic Product (GDP) of Nigeria, amounted to N7.370 billion, while N1.370 billion was paid in taxes to government, N2.10 billion in airport fees to the Federal Airports Authority of Nigeria (FAAN) and N3.90 billion in charges to the Nigeria Civil Aviation Authority (NCAA) and Nigeria Airspace Management Agency (NAMA) last year.

Despite the huge potential for growth in the nation’s aviation sector, the airlines are still not able to compete favourably with European airlines, who are currently raking out of Nigeria over N180 billion annually. But these huge contributions to the economy have been jeopardized as the cost of flying has drastically reduced. This week alone, 30 percent reduction in domestic air travels have been speculated.

Within the week, air tickets prices on the Lagos-Abuja route hovered between N24,000 to N32,000 or more on economy class. Some four months ago, air prices along same route hovered between N15,000 and N18,000 under normal circumstances. The airline operators have consistently attributed the sustained rise in airfare to sustained rise in Jet A1, otherwise called aviation fuel. They contend that unless fuel marketers reduce aviation fuel cost, the prices of flying cannot reduce. As at the last check, Jet A1 was selling for between N190 to N204 per liter.

Even at this exorbitant price, airline operators contend, the product is not in sufficient supply; an allegation petroleum marketers’ claim is false. Just Wednesday in Lagos, Major Oil Marketers Association of Nigeria (MOMAN) said huge debt running to N5billion caused its members to stop supply of aviation fuel to airline operators in the country.

Wale Tinubu, the chairman, who is also head honcho of Oando Plc disclosed at a media parley in Lagos that his members cannot continue to operate a debt regime in the face of their mounting overhead costs. He said there is no scarcity of aviation fuel in the country and debunked the allegation of sharp practices preferred against marketers by airline operators. It could be recalled that airline operators had recently blamed marketers for deliberately hoarding the product with a view to hiking its price. They said the development caused them to adjust airfare. Airline Operators of Nigeria (AON) recently appealed to the Federal Government to put an end to the exploitative attitude of the fuel marketers.

Some weeks back when the fuel marketers initially increased aviation fuel from N108 to N140, the Assistant Secretary of AON, Muhammed Tukur, had called on the Consumer Protection Council (CPC) to address the issue of the fuel marketers rather than blaming the airlines for increase in airfare. “We are not fighting ourselves but are striving for equity, success and unity in diversity,” he said.

Tukur had noted that fuel is priced in dollars and so a 10 per cent drop in the value of any National currency against the dollar will result in a 10 per cent increase in the cost of fuel locally. “Annual fuel costs in major airlines now run into several hundred million dollars levels, which accounts for about 40 per cent of the total operating costs. When a single cost centre commands a whopping 40 per cent of total cost, any business will not be able to ignore activities around that centre.” He explained that an ever increasing component of a variable cost, such as, fuel can only result in stifling the gradient of the total cost and threatening the Break Even Point (BEP) to a farther position, if care is not taken to the point of infinity.

Timothy Esan, a passenger, noted that if up to 20,000 passengers travelled through MMA2 within a week, that would be N50 million. “And in a month, that would be N200 million and N1.2 billion in a year. What do they want to do with that money?”

Though most service-providers across Nigeria see Nigerian consumers as docile, not asking questions and not demanding their rights, some aviation passengers are obviously miffed about this avoidable high flying cost and are prepared to fight it head-on. They reckon if the trend is not checked, they would be forced to mobilize other Nigerians to boycott air services for about a week.

A cross-section of the passengers who spoke to our correspondent at the MMA2 terminal said, by that action, the stakeholders would be forced to find a solution to the rising cost of flying. An Abuja-bound passenger who gave his name as Friday said the fares he was charged is appalling and wondered why he would have to pay that much to fly.

Another passenger, Michael, noted that it is even cheaper flying from Nigeria to Dubai than flying locally. According to him, air ticket to Dubai is less than N150,000 and the journey lasts about six hours while six hours flight within Nigeria may now cost you about N190,000.

Most of the passengers also described as a rip off, the N2500 passenger processing charge. It could be recalled that on 12th July, 2011, the Aviation Minister, Princess Stella Ada Oduah set up a Six-Man Committee to look into the high cost of aviation fuel and gave them the mandate to come up with recommendations that will help force down the price of aviation fuel within two weeks. The two weeks expire in a few days.

Other terms of reference include investigating the challenges facing airline operators, fuel marketers and all other related issues that impact cost of aviation fuel. The committee was the outcome of a parley by the minister and stake holders to find an immediate and lasting solution to the aviation fuel crisis. She had charged the committee to approach the assignment with a high sense of urgency, and expressed optimism that the challenges facing the sector would be solved if all stake holders resolve to dialogue frankly about all issues currently inhibiting the growth of the sector. For now, Nigerian air travellers are hoping and waiting while they pay through their noses to fly.