Airlines under pressure to raise fares

Nigerian airline operators are under immense pressure to raise airfares due to the sliding of naira, which further crashed to N280 to a dollar yesterday.

The naira had traded at N375/$ on Monday, but exchanged at N390 to the greenback last Friday. Before airlines can raise fares, they would need to get permission from the Nigeria Civil Aviation Authority (NCAA) and convince travellers who are already shunning air travel and taking to road travel on the reason for the impending hike. Already, the aviation regulatory body had warned carriers not to contemplate increase in airfare, saying the situa- tion would put more hardship on travellers.

The NCAA had stated that request for fare increase should be as a result of some indicators such as prices in aviation fuel and ensuring that additional fuel cost borne by the airline operators during the corresponding period must be on short time basis, not exceeding a period of two months in such instance.
This is coming as the carriers lamented the deprivation of foreign exchange allocation by the Central Bank of Nigeria (CBN) to carry out schedule maintenance services, which are carried out in dollars. Some of the operators who spoke to woleshadare.com said the current fare of between N12, 000 and N18, 000 was no longer feasible, adding that spare parts, fuelling and other cost, have made it practically impossible for them to charge what they currently offer and remain in business. A managing director of one of the carriers, who pleaded anonymity, stated that the spiralling fall of the naira could force many airlines to close shop, except government intervenes urgently.
The airline chief disclosed that the operators under their umbrella body, Airline Operators of Nigeria (AON) met with top officials of the CBN in December 2014 on how to get allocation for foreign exchange to meet operational needs. He, however, said that the carriers were given forms to fill, but the apex bank was yet to meet their request. He said that foreign airlines operating in the country are getting foreign exchange allocations at official rate, describing it as damaging to their own operations.
Former Director of Operations with the defunct Nigeria Airways, Capt. Dele Ore, predicted that the end is near for most of the airlines if they keep on charging what they presently charge passengers. He said: “Very soon, these airlines will fold up if they keep on charging what they are currently charging.
They cannot maintain safe operations, they can’t even break even. They have to pay for their maintenance, workers’ salaries and fuel in the face of falling currency. If they need to be in operation, they need to charge double what they are currently charging.” With the naira hitting an all-time low, domestic airlines are now in real danger. Aside the drops in the value of the naira, the airlines are also hit by the prevailing forex scarcity, as the apex bank continued to ration foreign currencies in its bid to strengthen the naira.
The situation is further worsened by local operators’ lack of maintenance facilities in the country. They also have to contend with reluctant foreign aircraft lessors who, following recent air mishaps, classified the country among “high-risk nations” for doing business. The development has also attracted very high insurance premium. Major aircraft leasing firms such as GE Capital Aviation Services (GECAS), International Lease Finance Corporation (ILFC), Cab Tree and Aer-cap have since raised the lease on aircraft to Nigerian airlines by over 40 per cent.
Consequently, analysts say domestic airlines are faced with a plethora of problems ranging from costly overseas maintenance of airplanes; expensive spare parts sourced abroad to mandatory recurrent overseas training of their pilots and crew and other foreign currently related expenses.

Wole Shadare