High Costs As Albatross To Air Travel In Nigeria, Africa

 Frequent air travelers within Africa agree that the cost of air tickets is too high. So serious is this issue that top African aviation stakeholders met penultimate week in Abuja to discuss factors responsible for the high cost of airfares and to come up with suggestions on how to address such factors, writes, WOLE SHADARE

 Panic response

At the just-concluded National Aviation Conference organized by the Federal Airports Authority of Nigeria (FAAN) held in Abuja penultimate week, industry experts said high airfare costs result from a convergence of multiple factors that include the cost of goods sold, intermediary costs, government taxes, regulatory charges, time of purchase (early-bird options tend fuel costs, market forces of demand and supply, and costs related to original equipment manufacturers.

They also identified safety and security concerns, poor intra-African connectivity, market access limitations, and inadequate infrastructure as some of the challenges facing the industry.

Not a few believe that the aviation sector was seriously over-taxed and over-burdened with high charges and fees thereby making travel by air unaffordable in most parts of Africa.

Nigerian airlines

Operators cry out

Chairman of Air Peace Airlines, Mr. Allen Onyema who represented other carriers under the aegis of Airline Operators of Nigeria (AON) said, “Apart from the aeronautical charges and government taxes, airlines also pay additional charges and fees for ancillary airport facilities and services, ground handling services, oversight, and regulatory services by CAAs (civil aviation authorities)”.

“Airlines are equally faced with high jet fuel costs; however, the charges and taxes levied by far have the highest impacts on the prices of tickets for air travel in Africa,” Onyema stated.

Lamentation

Participants at the summit lamented that jet fuel costs more in Africa, including in oil-producing countries than in Europe or the Middle East.

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Africa is the region with the greatest aviation potential, but punitive taxes, and high infrastructure and fuel costs are curtailing air transport’s benefits on the continent, 

The average fuel cost in the continent is 35 percent higher than the rest of the world. Even in oil-producing countries, aviation fuel, otherwise known as JET A1 is not only expensive but scarce in some cases.

Crossroads

Former Regional Vice President, Africa, and the Middle East, International Air Transport Association (IATA)  Mohammed Ali Albakri a few years ago said “High taxation is one of the root causes of the reason airlines are dying; so the government can help to save the airlines by reviewing downwards the taxation levied on them.”

‘If they continue to heavily tax the airlines it will continue to impact on their finances and you see that some of them are dying. There is something definitely wrong somewhere”.

Many airlines have been voicing concerns about the impact of rising fuel costs – airlines’ largest operating cost item – on their financial recovery. Fourth-quarter 2021, according to the forecast, tends to be a seasonally weaker quarter for airline passenger revenue as the fuel price increase represents an unwelcomed challenge. The country now relies heavily on foreign nations for the supply of these fuels.

The country spends a substantial part of its foreign exchange on fuel importation. Nigeria is a petroleum-producing and exporting country.

But like Libya, she is dependent on foreign nations for her liquid transportation fuels (mostly gasoline and diesel) produced via petroleum refining. Nations all over the world depend largely on refined petroleum products to meet their transportation energy requirements. Gasoline, diesel, and aviation kerosene are the most common fuels used in the transportation sector.

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Jet fuel hits rooftop

Aviation fuel costs more in Nigeria and other oil-producing countries than their counterparts that do not produce oil.

Jet fuel is central to the operations of an airline, as it constitutes between 35-40 percent of an airline’s cost. The price of the commodity – laden with taxes – in the West African sub-region, is the highest in Africa.

While the specialised fuel is sold for about $2.30 cents per gallon in Nigeria, $2.30 in Benin, and $1.94 cents per gallon in Cameroon, it is sold for close to $3.14 cents in Ghana, which also produces oil. In Luanda, Angola (also an oil-producing country), it costs $3.75 per gallon; Libreville $2.05 per gallon; Khartoum, Sudan $2.44 per gallon.

It is only Equatorial Guinea that sells JET A1 for $0.46. Jet fuel prices in some African capitals are double the global average and it is posing a threat to its aviation sector development.

For instance, in Nigeria, despite the stability in the lifting of aviation fuel across the country and the deregulation of the commodity, JET A1 has hit an all-time high of N600 per litre.

The skyrocketing price of JETA1 in Nigeria has added more to the pains of airlines, which use 30 percent of their revenues for fuelling aircraft.

 

African airlines

 

Safety concern

The participants at the summit admitted that the situation has improved substantially in recent years, they acknowledged, although there is still a perceived poor safety record of African airlines compared to other regions due to factors such as old airplanes, poor aircraft maintenance, and sub-standard airport infrastructure.

Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Musa Nuhu said that high aviation costs have hindered inter-and intra-African commerce, business, and leisure travel, which have diminished the competitiveness of African products in the global market.

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The outbreak of the COVID-19 pandemic dealt a big blow to the continent’s carriers as they are yet to get out of the woods and are pressed down by other factors that are threatening their existence. It has worsened their situation just like elsewhere in the world.

According to IATA, the clearing house for over 200 global airlines and one that supports aviation with global standards for airline safety, security, efficiency, and sustainability, the African airline industry lost up to $6 billion last year due to the pandemic.

Pandemic effects on airlines

COVID-19 exacerbated African aviation’s age-old problems such as limited inter-Africa connectivity, weak passenger load factors, inadequate infrastructure, high cost of inter-Africa travel, and high financing premiums.

To recover, the aviation industry has been putting in place enhanced COVID-19 prevention and management measures.

Many airlines have downsized their operations and staff to survive the pandemic, with the cost of testing for COVID-19 perceived as a new passenger tax.

Foreign airlines in flight

Industry stakeholders say that a restart and recovery must be an opportunity for African aviation to address high operational costs.

To them, another solution to lower airfares could be governments’ regulatory intervention through provision of subsidies, protectionism, involvement in the value-chain system especially preferential procurement of vital equipment and ownership of critical infrastructure, and provision of necessary economic safeguards.

Last line

They observed that the industry needs specific materials for sustainability guidance and best practices that aviation industries can adopt.

Wole Shadare