Air Peace, Max Air, Aero, Others May Shut Down Over Naira Devaluation, Raise Airfares to Stay Afloat
- Domestic Airlines in Nigeria said they face imminent extinction following the high operation costs
- The operators revealed that the fast depreciation of the naira is contributing to the rise in costs faced by the airlines
- The development comes amid a rise in domestic airfares by the airlines in Nigeria
Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and the Economy.
Following the crash of the naira, airline operators have raised the alarm that some domestic airlines may permanently halt operations from March next year if government intervention does not come quickly enough to cushion the high operating costs in the sector.
According to the operators, the naira devaluation, which now trades above N1,300 per dollar, could force some airlines into extinction.
Source: Getty Images
Christmas period to delay airline shutdown
ThisDay reports that the Managing Director and Chief Executive Officer of Aero Contractors, Ado Sanusi, revealed that some airlines may halt operations early next year if help does not come to the industry quickly enough.
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Sanusi insisted the Christmas period would delay the bankruptcy of some airlines due to high passenger traffic.
He stated that from March next year, when the low season will begin, some airlines will not be able to cope with high operating costs.
According to the Aero Contractor boss, some domestic airlines will go under by March next year due to low patronage and a reduction in the number of airlines in the country.
He stated that passenger traffic may stay relatively high as most passengers could still afford air travel but will adjust travel frequency.
Forex scarcity and naira depreciation affecting airline costs
The Chairman and CEO of United Nigeria Airlines, Obiora Okonkwo, said that the devaluation of the naira is affecting businesses and the aviation industry.
Okonkwo, also the spokesman for Airline Operators of Nigeria (AON), revealed that 99% of airline operations depend on foreign exchange, mainly USD, stating that the US dollar is the currency of the aviation industry globally.
The United Nigeria Airlines boss stated that the Nigerian government should provide fuel to the operators at a low cost and allow them to access Forex at an affordable rate.
Okonkwo cautioned that if operation costs continue to rise and the airlines pass them to the passengers, they might cease to exist.
“ The airline will not continue to operate at a loss, so they will be forced to close down,” he said.
He stated that the airlines are going through a rough patch, saying there should be a particular policy to alleviate the financial challenges affecting some sectors of the economy.
Airlines raise the price of domestic fares
The development comes amid an increase in the ticket price of domestic airfares.
Airlines operating local routes, including Air Peace and Dana Air, have adjusted their ticket prices, citing economic realities. According to the Guardian report, the airline operators blamed the rising cost of aviation fuel, which now sells for N1,000 per litre, and the naira exchange rate, currently at N1,200/$.
To reflect the changes, domestic airlines have increased airfare by over 100 percent in significant routes. Checks by Legit.ng shows that less than one hour of light now costs more than N100,000 for a one-way ticket.
Prices per route per airline
BusinessDay reports that Air Peace has adjusted its Lagos to Abuja ticket prices and now charges between N100,300 and N162,000 one-way tickets from its previous range of 55,000 to N65,000.
Similarly, tickets for the Lagos to Enugu route in the economy flexible category cost N100,300. Prices are even higher for travelers planning to journey from Lagos to Owerri between December 15 and January 5.
Prices are even higher for travelers planning to journey from Lagos to Owerri between December 15 and January 5.
Prices rise from N60,000 to N105,000
Checks show that an economy-flexible one-way ticket, once priced at N50,000, has now increased to N105,000, while a business domestic outbound ticket can go as high as N190,600.
The return journey from Owerri to Lagos in the economy flexible category now costs travelers N133,400. For flights from Lagos to Port Harcourt, a one-way ticket, which used to sell for an average of N60,000, now costs between N105,000 and N133,400, while the economy flexible inbound ticket ranges from N100,300 to N133,400.
"It's Cheaper": Air Peace, Max Air, and others suggest palm oil as aviation fuel cost hits N1000/L
Legit.ng reported that Airline operators have said Nigeria is mature enough to find alternatives for aviation fuel, also known as JetAI, considering the high cost of imports.
The operators called on the Nigerian government Wednesday, October 18, 2023, in Abuja at a meeting on developing and using Sustainable Aviation Fuel (SAF), Low Carbon Available Fuel, and other transparent fuel sources in Nigeria.
Captain Roland Iyayi, who spoke on behalf of Airline Operators of Nigeria, said the country is in a better place to drive alternative fuel sources for the aviation industry by exploring palm oil.
Source: Legit.ng
