There has been a 100 percent increase in air fares from Nigeria to other countries as a result of dollar shortage and scarcity of aviation fuel in the market.
A visit by our reporter to the Murtala Muhammed International Airport in Lagos yesterday, showed that British Airways which had previously charged N250,000 or less, for an economy class return ticket from Nigeria to London when the exchange rate was N150 to a dollar, now charges N500,700.
Furthermore, KLM, which previously charged below N150,000 for a Lagos – London economy class return ticket, now charges N244, 950 while Arik Air, which plies local and foreign routes, charged a sum of N217,000 for the same destination.
Passengers travelling to the United States are seeing similar increases as British Airways which before now charged below N400,000 for an economy classs return ticket to Atlanta, now charges N683,000, while Air France charges N500,000, United Airlines charges N467,900 and KLM charges the lowest fare of N449,900.
A father who bought tickets for his two children yesterday, told BusinessDay that, “Despite the economic situation in the country, I had to cough up a sum of N1, 366,000 to pay a return ticket for two of my children to travel for an examination in United States. I never expected the amount to have risen to this level. I was told it was because of the dollar exchange rate.”
BusinessDay findings are that airlines in Nigeria are having difficulties with their operations as the biting dollar shortage and elevated black market rates leave them facing losses on their routes and struggling to acquire foreign exchange for routine and scheduled maintenance.
“The foreign exchange rate has made it difficult for customers to get dollars and it has a negative impact on the traffic level of our airline,” Jean-Raoul Tauzin, General Manager Air France /KLM Nigeria and Ghana said in an interview with BusinessDay.
Tauzin explained that Air France has naira in Nigeria, which they routinely transfer to Europe and when there are fewer available dollars, it becomes a problem.
Airline sources say consumables such as spares for planes have become harder to buy and stock in large quantities, while repayment for lease rentals and loans have kept dragging, as the dollar shortage worsens.
The FX restrictions have led to a spike in the exchange rate in the black or unofficial markets to N290 per dollar.
Nigeria’s foreign exchange reserves are down by 4.26 percent or $1.24 billion year to date to $27.82 billion as at March 01 from $29.06 billion, as oil prices slumped below $30 per barrel, data from the CBN show.
A spokes person for an international airline, speaking to BusinessDay anonymously, explained that with the current paucity of forex in the market, it is difficult for both local and international airlines that are faced with the challenge of getting hard currency.
“Most of the cost of operations comes from abroad. We are talking about financing of the aircraft, payment of crew abroad, maintenance and many more, which have to be settled abroad. This means we need hard currency, as only a few costs can be settled in naira,” the source said.
He further explained that the airlines are depending on the Central Bank of Nigeria (CBN) to give them forex, as the tickets are calculated in dollars, which have to translate to naira for people to pay.
“We cannot take the naira and go to the black market because the rates are high and it kills profit in any business. To get the hard currency for the proposed exchange rate is a very tough one, so we are depending on the CBN to review this policy.”
Analysts say airlines could increase fares to cushion declining sales and strains from the FX scarcity. However, such a move could result in a further decline in demand from passengers, even as the status quo is clearly unsustainable.
BusinessDay findings also show that the scarcity of fuel currently being experienced across the country may have taken a toll on the aviation sector, as some airlines are already delaying and cancelling flights on account of the shortage.
The situation is also resulting in passengers missing their appointments and business schedules, due to delays and cancellations.
The limited supply of JET A1 (aviation fuel) across the country in the last few days has significantly hampered Arik Air’s flight operations, the airlines spokesperson, Banji Ola, said in a statement issued to BusinessDay three days ago.
Ola said with over one 100 flights daily, the limited supply of aviation fuel has resulted in flight delays and sometimes outright cancellations.
“We appeal to our valued passengers to bear with us at this time, even as we remain committed to providing a safe and comfortable flight experience.
“We sincerely apologise for any inconvenience our passengers may have suffered due to the fuel shortage,” he added.
Kingsley Ezenwa, Dana Air spokesman, said that though the airline has not cancelled or delayed any flights so far, he was not sure of what could happen the next day.
“We are still running normal operations, no delays, and no cancellation, however I don’t know what could happen tomorrow but our operations department confirms we’ve not cancelled any flight so far,” he said.
Medview management also said it has a solid arrangement with its aviation fuel supplier, adding that it was not experiencing any delays or cancellations for now.
Jet A1, the fuel used on most airplanes is relatively expensive in Nigeria.
The price of a litre of aviation gasoline has increased in the past one month by as much as 10 percent.
The increased cost has a negative effect on margins, as airfares remain unchanged to trade-off for increased fuel expenses.
Aviation experts say the majority of aviation-friendly countries have low interest rates, stable and easily convertible currencies, and nil draconian policies that adversely affect airline operations.
Purely domestic airline operators may however be less affected by FX shortages than their foreign counterparts, despite Nigeria’s challenging business climate.
“Foreign exchange for our operations is sourced through the Central Bank via our bankers. Airlines have to bid, same as every other industry for available funds,” said Obi Mbanuzuo, Dana Air’s Accounts Manager.
“We have noticed a slight drop in the cost of Jet A1 but this has completely been wiped out by the rising cost of dollars and the unavailability in the market of forex to service debts overseas and run operations.”
IFEOMA OKEKE
