Airlines mull further fare hikes over high operational costs

…lament almost empty flights

….Why we’re flying at a loss, by Okonkwo

 Nigerian carriers are lamenting the sharp drop in load factor, especially after the peak Yuletide season, a situation they said is leading to revenue losses.

The spokesman for Airline Operators of Nigeria (AON), the umbrella body for airlines in the country, Prof. Obiorah Okonkwo, said that from late January and into February, the carriers were practically flying empty because the market was low.

He admitted that airfares cannot be adjusted simply because of citizens’ low income, stating that he had encountered arguments that some citizens earn below N100,000 per month and that, for such people, it would take them the rest of their lives to save and buy an air ticket.

While not ruling out a further spike in fares, Okonkwo stated that as long as operational costs and interest rates remain high, air fares in Nigeria will remain high, saying, “We just pray there will be no additional factor that would cause a spike.”

Speaking at a Webinar recently at the weekend, the chairman of United Nigeria Airlines disclosed that the airlines are now flying at a loss due to the low-peak season.

He said, “I have checked my capacity today; some routes are averaging below 50 per cent. As industry experts, we know that even with a 75 to 80 per cent passenger load, we are still losing money. So, we go on to lose money for the next month or a few months.”

He stated this amid raging concerns about the alleged exploitation of many Nigerian travellers by airlines, especially during the last Yuletide, when fares jumped by over 350 per cent, forcing many to travel by road.

He noted that in other parts of the world, airlines ground their aircraft, and only those with the financial muscle to bleed and sustain the losses continue to fly, revealing that his economy for March and February must be factored into my annual calculation.

“You have financial obligations to banks, and you must present business plans and financial projections before borrowing money. So we need more understanding of how this works. We do not even have the opportunity to form a cartel and fix prices.”

Dispelling allegations that airlines craftily block their portals to deny offering cheaper fares for a few weeks or months to peak seasons, unlike what the airlines in other climes do to enable travellers book their flights all-year-round, the airline chief stated that airlines may not open their portals early, not because they do not want to, but because of regulatory requirements.

He reiterated that, by rule, they cannot offer aircraft inventory that is not in their possession.

He explained, “For instance, if United Nigeria is waiting for an Aircraft, Crew, Maintenance and Insurance (ACMI),(wet lease) aircraft to operate routes in December, and that aircraft arrives in Nigeria in mid-November, until it is inspected and approved by the Nigeria Civil Aviation Authority (NCAA), we cannot sell tickets for it.”

That is the reason. Unlike in some countries, we do not have the luxury of keeping aircraft year-round. We bring in wet-lease aircraft for specific seasons and return them at the end of March. Most operators do this. You cannot offer what you do not have; you violate NCAA rules. If United Nigeria does not have a flight on a certain day, and Air Peace is operating, they may be using an E2 aircraft with 100 seats, while I have an A320 with 70 seats.”

“Because people do not know these things, they blame the airlines. It is not fair to say airlines block portals to make money. Airlines are free to offer tickets, and passengers are free to buy them. Prices are progressive”.

He attributed the rising air fares in Nigeria to the high operating costs that apply in other parts of the world, including jet fuel and maintenance, among others, and admitted that airfares cannot be adjusted simply because of citizens’ low income.

“It is expensive to procure equipment. If you go to a bank to borrow about N100 billion at a favourable interest rate of 30 per cent, it could even be more. We are talking about flat interest; interest on N100 billion is a minimum of N30 billion.”

“These things add up, and you have to bring them into the cost of operation. The good thing that has happened to the aviation industry is that it is deregulated. So you have to choose your costs based on your operational expenses and then leave the choice to the traveller to buy or not to buy.”

Wole Shadare