Nigeria: Domestic Carriers Struggling to Survive Despite High Cost of Operation
As Nigerian airlines strive to adjust to the new realities of high cost of aviation fuel, depleting passenger traffic and scarcity of forex, Chinedu Eze writes that the trying period may be the most precarious for the airlines, as many grapple with uncertain future
At the Air Transport Service Senor Staff Association of Nigeria (ATSSSAN) secretariat, located at the Concord area of the Murtala Muhammed International Airport, Lagos, there was no rumbling noise of aircraft taking off overhead the building.
The building, which also houses the secretariat of the League of Airport and Aviation Correspondents (LAAC) is at the flight route of Runway 18L, which is the domestic runway. Immediately aircraft takes off from the runway, it flies above the building in seconds. But recently, the aircraft take off sound has reduced, an indication that flight has also reduced. In the past at least aircraft takes off every 10 minutes, but that is no more in recent times.
A recent visit at the domestic terminal, known as MMA2, showed low activities at the departure hall, as few passengers were queuing for flights or buying tickets. The hustle and bustle was gone. A ground staff of one of the airlines told THISDAY that activities had drastically gone down but there was high passenger turnout in the morning, “but not like what we used to have in the past.”
Some ticketing officers of various airlines were having a rest in their cubicles; some checking in counters were idle, while travellers sporadically turn in to buy tickets. THISDAY noticed that Max Air was checking in Lagos-Kano passengers, while Azman Air was boarding passengers upstairs.
High Cost of Tickets
A passenger, who bought a return ticket on Sunday to travel to Abuja from Lagos and back on Tuesday, paid as much as N192, 000, which is almost N100, 000 for one leg of the trip. Industry observers say that not many Nigerians can afford to pay for such “outrageous fares”, but that is airlines’ response to the “outrageous” cost of aviation fuel. A top operator told THISDAY that about 55 per cent of passengers could still be travelling ” and they can only travel when it is very necessary and I foresee a situation whereby airlines would scale down their operation because not many will be needing their service and even sourcing aviation fuel is difficult.”
But with the withdrawal Aero Contractors and Dana Air from service, it is expected that existing airlines would still have enough passengers to attend to.
Former CEO of Aero Contractors, Captain Ado Sanusi, said the reduction in the number of airlines would further shrink the number of operating aircraft and with increase in demand and limited supply of equipment, airfares will continue to rise.
“The impact of removing two airlines out of already depleted sector will definitely impact on the capacity and lead to increase in the price of tickets. Demand will increase in the face of shortage of available seats. This may give rise to panic buying, as airlines with the knowledge that two airlines are down would increase their prices and force people to start booking ahead. So the Nigerian Civil Aviation Authority (NCAA) should ensure that it effectively regulates the industry. It should look at the health of the airlines, their finances and also protection of the consumers,” Sanusi said.
However, Spokesman of Air Peace, Stanley Olisa, told THISDAY that despite the fuel crisis, the nation’s biggest carrier is doing everything possible to meet the demand of its customers and so far has continued to operate its route network and despite the challenges, the airline has just opened flight to China and would soon extend its wings to India.
“The fuel crisis is impacting on every airline but we have maintained our operation and continue to service our route network. The number of aircraft we have now is even more than what we had five months ago. We know we have customers to serve and despite the challenge we just started operation to China and soon we will extend our service to India. So we still service our route network; although the fuel crisis is affecting every airline, but so far we have been able to sustain seamless service to our customers,” he said.
Worsening Supply Situation
It has become evident that as Nigeria continues to import refined fuel products it would continue to suffer hiccups because of the depreciation of the naira and dearth of forex. THISDAY learnt that it is becoming increasingly difficult sourcing foreign exchange to import these products and the only decisive solution is local refining of the products.
The CEO of CleanServe Integrated Energy Solutions Limited, Chris Ndulue, told THISDAY that the cost of aviation fuel might continue to rise as long as the price of crude remained high in the international market and Nigeria is still importing. So the price of the product is determined by the price of crude, the exchange rate and landing cost. He said that the marketers are also facing their own challenges because you may finish selling the product but you won’t see another one to buy and you may finish selling but you need to double the funds you used to buy the same volume of product you just sold because the cost has increased. He said that the solution to the crisis is local refining of fuel products and commended the airlines for the efforts they are making to remain in service and urged government to give the airlines support and incentive to help them sustain their operation.
On Wednesday THISDAY reported that the Minister of Aviation, Senator Hadi Sirika said there was no immediate solutions to the multi-pronged crises rocking Nigeria’s aviation sector.
He stated this after a meeting with the Airline Operators Association of Nigeria (AON) in Abuja, noting that the variables impacting the crises in the aviation sector were beyond the industry’s control thus, “there is no immediate solution.”
Sirika insisted that there was no short-term solution because the problem affecting the industry is global energy crisis.
“Today there is aviation fuel problem all over the world; from America to New Zealand. It is aggravating in Nigeria because we don’t produce the product. It’s aggravated also because the foreign exchange is scarce in Nigeria because the source of earning the foreign exchange also has dwindled,” Sirika said.
He reiterated that the federal government had in the past, sourced 10,000 metric tonnes of aviation fuel for the airlines, adding that the government was willing to do more.
According to him, “As we speak, the government is in the process of finding a permanent solution to the issue and some of the solutions include: importation of the product at appropriate price, accelerating the refurbishment of our refineries and also wait for the coming on stream of Dangote Refinery to boost supply of the product. So when you ask how soon, I wouldn’t know when Dangote will come on stream, I wouldn’t know how soon the refineries will start work, I wouldn’t know when imports would become sufficient. But the government is working towards all these to happen.”
The Trying Moment
A senior official in one of the aviation agencies told THISDAY that the industry ‘is obviously hanging.’
“If Dana Air could suffer the fate (being grounded) it means that any other airline will suffer the same fate. There is shortage of capacity now. Fares in the industry have increased so this will reduce patronage and lower operations, but you cannot divorce the industry from the national economy. What is the purchasing power of average Nigerian?
“Government has been trying to pay salaries but this is not easy. If government cannot meet its obligations what happens to the economy? They cannot even release blocked fund. If the nation’s economy is good it will affect the industry. Other airlines must learn from Dana Air and Aero Contractors so that they thread carefully. We know other airlines are going through similar situation. Airlines don’t have cash flow, but the business is prepaid,” he said.
THISDAY investigation revealed that with the exit of Dana Air and Aero Contractors, some of the existing airlines are delaying flights more than before, as they find it difficult sourcing aviation fuel.
“Some of these airlines delay flights up to five hours and because of fuel scarcity, one airline has developed the habit of leaving passengers luggage behind in order to carry more fuel and after they will come back to carry the luggage. Economy fares are from N78, 000 and business class fares start from N95, 000. Some airlines charge N120, 000 and N130, 000. If you come to the terminal the place is scanty. People are no more travelling like before. Just imagine a family of four travelling. You can imagine the cost of their tickets; so many have stopped travelling and some have decided to go by road, despite the inherent security risks,” a protocol officer told THISDAY at MMA2.
An airline official said that there are two major problems with aviation fuel: it is scarce and it is costly, remarking that it is the scarcity that is causing flight delays, while the high cost of the product gave rise to high fares.
“There is no fuel! You have ramp full of aircraft, awaiting refueling almost on a daily basis. You’re running helter skelter and queuing to fuel. Please let us check first what’s happening and then comment with knowledge. Scarcity is one and pricing is another. But let there be fuel when you need it so you can operate according to your schedule,” the official told stakeholders in a Whatsapp platform.
In a recent statement by AON, the association warned that there was acute fuel scarcity that would disrupt the operations of the airlines.
According to the statement, which was signed by its spokesman, Prof/Obiora Okonkwo, “This is to notify the members of the public, especially, consumers of air transport services in the country, that the aviation sector has been hit by a major crisis with the acute scarcity of aviation fuel otherwise known as Jet-A1. For this reason, there will be major disruptions in scheduled flight operations including cancellations and unnecessary delays across all airports in the country.
“This is a foreseen but unintended consequence of the aviation fuel scarcity in the country. We, therefore, plead for the understanding of the travelling public to bear with our members as efforts are currently being made to address the development and restore normal flight operations. AON is committed to rendering seamless and uninterrupted air transport service across the country.”
The Case of Dana
Although NCAA said that the suspension of operating licence of Dana Air was indefinite but THISDAY learnt that the airline was given conditions, which it must meet before it would be allowed to resume operation and the airline is decisively making efforts to meet those conditions, which border on finance and technical issues.
THISDAY also learnt that before its operation was grounded, Dana Air was already making plan to acquire fuel-efficient aircraft because it realised that if the current fuel price continues and it continues to operate the MD83 aircraft, it would be forced out of business; although the aircraft type is said to be very efficient but they are fuel guzzlers.
With fuel-efficient aircraft, THISDAY gathered it could be saving up to N25 million from the N60 million it was spending daily on fuel under the current price of aviation fuel. So the airline hopes that when it returns to operation, it would strive to acquire more modern aircraft that are more fuel-efficient.
So, as the airlines operate, they hope for succour; that the cost of aviation fuel comes down and the naira gains in value and also that Nigeria begins to refine its own petroleum products.