Operating costs of domestic airlines in Nigeria have continued to increase as a result of several factors, some of which include the aircraft type operated by the airlines, cost of aviation fuel and aircraft maintenance.
Airline sources who spoke to BusinessDay said that over the years, airlines have had to battle several costs, some of which include multiple taxations and pilot training, which have spiked their operating costs.
“Apart of the high cost of aircraft maintenance, multiple charges and cost of aviation fuel, domestic airlines also have to pay more for maintenance and aviation fuel because we fail to use the right equipment,” Allen Onyema, chairman of Air Peace told BusinessDay.
Because of the short distance of one hour or 45 minutes, domestic airlines ply within most locations in Nigeria, Onyema suggested that other aircraft such as the Embraer ERJ 145, a 50-seater plane is also cost-effective.
“We started with Boeing 737 and Dash 500, these are a little bit economical compared to Dash 800 and 700. You cannot be doing 30 minutes or 45 minutes journey with Dash 800 and 700. These aircraft types will be building up a lot of landings and engine maintenance is calculated based on your landings. As a result of this, aircraft which is supposed to do one landing within six hours will be doing six or seven landings in six hours. This will make aircraft go for maintenance frequently than expected,” he explained.
On aircraft maintenance, Business Day checks show that within a period of 12 to 16 months, Nigerian airlines usually take their aircraft outside the country for periodic maintenance.
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John Ojikutu, member of aviation industry think tank group, Aviation Round Table (ART) and chief executive of Centurion Securities told BusinessDay one single C-check on an aircraft cost from $600,000 to 1.5 million dollars. He said this amount is enough to wipe out one year profit made by an airline.
Medview Airlines Nigeria Plc recently reported a 6.30 per cent drop in third-quarter net profit as the company’s operating costs spiked on the back of maintenance costs incurred on newly acquired aircraft.
For the first nine months through September 2017, the company’s net income fell to N1.19 billion from N1.27 billion the previous year.
Sales surged by 48 per cent to N28.77 billion in the period under review from N19.44 billion as in September 2016.
A breakdown of sales figure shows revenue from Hajj operations, Domestic Operations, and International operations increased by 47.01 per cent, 28.67 per cent, 50.65 per cent, to N8.13 billion, N3.68 billion and N3.48 billion respectively.
While Medview’s sales increased in the period under review, the aviation giant incurred huge operating costs as the company spent money to maintain assets it acquired to increase the share of the market.
Operating cost increased by 45.81 per cent to N24.22 billion in the period under review while Aircraft maintenance surged by 1671.18 per cent to N1.73 billion.
The company spent N4.45 billion on aviation fuel-ATK, which represents a 46.38 per cent increase from last year’s N3.04 billion.
Analysts say the cost of maintenance wouldn’t have ballooned if aircraft are maintained in the country as firms pay in foreign currency to buy aircraft parts.
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“The cost of aircraft maintenance would have reduced by at least 30 per cent if Nigeria has maintenance facility in the country, but the crash of the naira has increased the cost of maintenance,” said the head of flight operations, Air Peace, Captain Victor Egonu.
BusinessDay’s checks show that the cost of aviation fuel in Ghana is the equivalent of N130 to N150 for a litre but in Nigeria, the price of the product, which in the last few weeks was about N180 to N200 per litre has recently increased to between N210-N215 in Lagos.
“You wake up to discover that the price of Jet A1 has increased by 30 per cent. And you cannot quickly adjust your ticket prices to reflect that but you have to buy that Jet A1 at the new price to operate your flights that day, but the passengers have bought their tickets for that day’s flight at the old fares,” Ado Sanusi, the chief executive officer of Aero Contractors said.
“It is only in this country that this is done and I think that there must be a way of introducing the new price regime, recognising that we are in a free market and it is not regulated. This will help you to know the cost of your operation every month,” Sanusi said.
IFEOMA OKEKE
