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The Managing Director of Aero Contractors, Capt. Abdullahi Mahmood, has attributed the high cost of air fares to the difficulty in accessing foreign exchange from the Central Bank of Nigeria (CBN) as virtually all the airlines have resorted to the parallel market to meet high cost of operations, including importation of aircraft spare parts.
Mahmood told Aviation Metric on the sidelines of a press briefing to announce the commencement of Bauchi route on Wednesday that the majority of airlines’ dealings were done in foreign exchange, stressing that the situation had slowed recovery for the airlines from the effects of COVID-19.
His words: “We don’t source anything domestically. Whatever you want you have to buy it from outside. Airlines in Nigeria are suffering today because of lack of access to foreign exchange. That is why people are screaming, the cost of tickets are high.
“It is not because airlines want to increase the cost of tickets, but airlines also do not want to operate at a loss. If you don’t calculate very well, then your numbers are running in the negatives. The airlines most times go to the parallel market to get forex. That is the most disturbing part of the things airlines are going through in the country, but if you talk about recovery, getting passenger numbers; I think the airlines are doing very well on that.
“Nigerians travel a lot, even travel for no reason, which is good for the airlines. We want them to travel.” Aside from the difficulty in getting forex, aviation fuel, otherwise known as Jet A1, has equally gone up, a situation that has put airlines in a difficult situation as to the actual amount fares should cost while striking a balance between breaking-even and strategy not to scare many intending travelers”.
A few months ago, domestic air fares went as high as N80, 000 and N100, 000 depending on the time of booking and how many airlines offer such services to the destination. Air fares are observed to be on the high side. The most traffic route in the network, Lagos-Abuja, has an average of N40, 000 from N25, 000 pre-COVID-19 per passenger flight hour.
This translates to about $80 at the current rate. Meanwhile, flights on B737-500, 700 series in western countries offer $45 per passenger flight hour.
Experts, who spoke to our correspondent, stated that the demand for a particular good or service depends on a variety of factors, among them consumers’ taste, income level, price and quality of the product in question and the prices of other goods, especially goods that are close substitutes.
To them, as a general rule, when other influences on demand remain unchanged, as higher price for a product results in a lower quantity demanded.
However, the price responsiveness of demand varies from one good to another and from one market to another. The own-price elasticity of demand, according to them, measures the responsiveness or sensitivity of the demand for a good to change in its price when other influences on demand are held constant.
The basic concept of own-price elasticity of air travel in different market segments they reiterated suggests that if air fares are reduced on Nigeria’s domestic routes, demand for air travel is likely to increase, since routes are short-haul.
Meanwhile, the entrance of new airlines into the Nigerian aviation industry could trigger drastic fare reduction as Green Africa Airlines that is set to make its debut on June 24 has introduced fares as low as N16, 500 and N23, 000 to popular destinations of Lagos, Abuja, Ilorin and other cities it plans to operate.
Other new comers like Cally Air, Cardinal Airlines and a host of others are at the verge of beginning air services. For instance, an airline regarded as one of the biggest in Nigeria slashed its airfare from Lagos to Ilorin (flight operations to Ilorin are slated to commence in June 2021) from N52,500, which some airlines charged last month, to N32,700.
Also, the fare from Lagos to Abuja has dropped from N60,000 (in April) to between N23,000 and N29,000.