Airlines’ profit margin can’t withstand operational shocks-Nwuba

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…says rising cost, declining passenger numbers threaten carriers’ survival

…FCCPC, NCAA, NANTA fault opaque fare structure, want transparency

                                       

Aviation analyst Alex Nwuba has opened up on why airfares are high, while stressing that domestic airlines operate on dangerously thin margins despite the high airfares.

Nwuba made the observation during an aviation town hall webinar titled, ‘High Air Fares – Are Airlines Really the Problem?’ which had panelists such as the President of the National Association of Nigeria Travel Agencies (NANTA), Dr. Yinka Folami, Chairman, United Nigeria Airlines, Prof. Obiorah Okonkwo, Executive Commissioner (Operations), Federal Competition and Consumer Protection Commission (FCCPC), Louis Odion represented by Director, Corporate Affairs, FCCPC, Ondaje Ijagwu, Director of  Public Affairs and Consumer Protection, Nigeria Civil Aviation Authority (NCAA), Michael Achimugu, Aviation Editor, New Telegraph, Wole Shadare and Principal Managing Partner of Avaero Capital Partners, Sindy Foster.

According to him, Nigeria’s aviation sector faces a structural sustainability crisis, as rising operating costs and declining passenger numbers threaten the survival of domestic carriers.

He warned that public perceptions of price gouging were misleading, noting that airlines had “no room for error or equipment delays”.

Nwuba said current air fares were driven solely by cost structures, not distance or flight time, and described affordability challenges as a new market reality.

He noted aviation fuel now accounts for about 38 per cent of operating costs, alongside aircraft leasing and maintenance, shifting the minimum sustainable ticket price.

“A Boeing 737 Lagos–Abuja flight costs about $9,000 to operate,” he said, citing a 162-seat configuration.

He added that the cost per seat ranges between ₦77,000 and ₦84,000 on such flights.

“For sustainability, fares must exceed ₦100,000. Anything lower reflects a low-cost model most airlines cannot currently sustain,” Nwuba said.

Presenting industry data, he highlighted a precarious financial gap facing domestic operators.

He said average figures showed a cost per kilometre of ₦104 and revenue of ₦112, leaving a profit of only ₦8 per kilometre.

“This narrow ₦8 margin means any shock, such as fuel spikes or grounded aircraft, quickly turns flights into losses,” he explained.

He noted December flights to the South-East were often 95 per cent full outbound, but return flights averaged just 35 per cent occupancy.

He identified reduced fleet size, caused by maintenance delays and financing constraints, as a major contributor to high fares.

According to him, the shrinking fleet has raised operational costs by up to 20 per cent.

“Without scale, airlines cannot achieve efficiencies needed for truly affordable fares,” he said.

He noted that domestic decline was driven by affordability, not airline failure, stressing that cost reduction required system redesign.

Shadare acknowledged the Federal Government’s enormous support for the sector, particularly for airlines in recent times, but further sought the government’s assistance in helping the carriers navigate the tough environment in which they operate.

He further stated that aviation contribution to Nigeria’s Gross Domestic Product (GDP) stands at $2.5 billion in 2025 representing just 0.7% to the nation’s GDP with 216, 000 jobs compared to the United Kingdom’s £ 22 billion; United States $1.45 trillion; Egypt $3.5 billion; South Africa $5.7 billion and Ethiopia $4.2 billion; an indication that government further support is needed to grow the sector.

Meanwhile, the NCAA, FCCPC, and NANTA have called for transparency in airfare increments.

Achimugu expressed his displeasure with domestic airlines over high fares, especially during December hikes.

He emphasised that the government’s support for the industry, including resolving dry lease issues, should translate to lower fares.

 “You would expect that as these issues have been resolved one after the other, it should reflect, no matter how infinitesimally, and with airfares. Now, there is a dry lease, and airfares are going higher.

“Of course, there are other factors which bring me to the communication style of the operators. I do not agree that the operators are communicating clearly enough.

Achimugu urged the Airline Operators of Nigeria (AON) to ensure proper communication with the government and other stakeholders.

He also faulted the assertion of 18 taxes and multiple taxation as part of the reasons for the astronomical fares, noting that the supposed taxes did not change, but the fares rose in December.

Also, the Director of Corporate Affairs, FCCPC, Mr Ondaje Ijagwu, clarified that the commission’s mandate in the aviation ecosystem did not include price-fixing of air fares.

He dispelled the common misconception that the FCCPC influences airlines’ airfare prices.

He said that the commission was only concerned and was therefore monitoring for fairness and economic justice.

“What we do essentially is to monitor the market to ensure that there is fairness in how operators are behaving,” he added.

On his part, Folami said fares had fallen by about 50 per cent during the off-peak season.

Folami questioned airlines’ imposed surcharges, stating that they significantly affected airfare prices.

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