Nigeria’s flight bookings collapse by 50%, FG, travel agents count losses
The inability of the Central Bank of Nigeria (CBN) to help foreign airlines repatriate over $700 million has done some incalculable economic damage to the travel industry in Nigeria.
Investigation by Aviation Metric indicates that Nigeria’s flight bookings in April alone collapsed by approximately 50 percent as travel agents are losing tonnes of business and huge revenue.
It is unknown how much the losses are, there are indications that the Federal Government may have lost over $300 million that would have accrued as many Nigerians have drastically reduced the frequency of foreign trips of stopped totally due to astronomic increases in fares forcing them to close lower ticket inventories by introducing the highest ticket fares on the Nigeria routes which are more than 400 percent of ticket costs before their funds in Nigeria skyrocketed to over $700 million.
Consequently, huge revenue that could have accrued to the government through payment of Ticket Sales Charge (TSC), Passenger Service Charge (PSC), and Cargo Service Charge (CSC) have been lost.
The Federal Airports Authority of Nigeria (FAAN) penultimate year raise domestic PSC from N1,000 to N2,000 and hiked international PSC from $50 to $100. What it means is that for any trip within Nigeria, passengers pay N2,000 to the government which is built into the fares and which is mandatorily remitted to FAAN.
For international travelers, each passenger pays $100 which is also built into the fares paid by the intending passengers.
Before the trapped fund crisis that had lingered for more than two years, return economy flight tickets to places in Europe like London, Amsterdam, and Madrid cost between N400,000 and N500,000 and could even be cheaper depending on the airline and time of purchase.
But the same ticket on the same route now costs between N1 million and N1.5 million and could even cost more for economy class tickets.
While the foreign carriers are having a field day, dictating the fares and travel policy, a travel expert said that no single carrier can meet the travel needs of Nigeria, reiterating that the country must intentionally and deliberately develop two or three flag carriers with a very clear mandate, stressing that the country’s airlines put together are too weak to compete with their foreign counterparts.
Today, foreign airlines are using all forms of strategy to withdraw their inventories and seats from Nigeria’s Point of Sale (POS) and may eventually quit as demonstrated by the on and off-flight operations of once flourishing Emirates Airlines.
Speaking to our correspondent, the President of Aviation Safety Round Table (ASRT), Dr. Gbenga Olowo said that the lack of preservation of the sanctity of contracts has continually eroded investors’ confidence and inhibits Foreign Direct Investment (FDI) not only in the aviation industry but other industries in Nigeria.
This he said is confirmed with foreign airlines’ home remittance backlog which he disclosed stands at $718 million as of March 2023, adding that this accounts for 44 percent of total airlines’ blocked funds in the world.
Olowo described that and others as a flagrant breach of the law of international trade, noting that airlines under the Bilateral Air Services Agreements (BASA) are mandated to remit net of earnings (after wages and taxes) back to their home offices, with the same applying to the country’s airlines when they fly outside the shores of the country.
To him, it is their trade funds and not borrowed, lamenting that unfortunately, this is happening the second time in Nigeria which makes it look like a disregard for honouring contracts in an economic policy.
Olowo recalled that during the early 1990s, the same scenario saw the likes of Swiss Air, Scandinavia, Alitalia, and Varig Brazilian Airlines among others exit Nigeria with all the negative multiplier effects like job losses, the collapse of industries, the collapse of trade and commerce, and strained relations among the operating nations such as cumbersome visa restriction regime.
“Nigeria’s national carrier is stillbirth in eight years and surrounded with legal tussles with endless controversy. Neither do we have sufficiently strong Nigerian carriers that can provide the much-needed services by these foreign airlines”.
He stated that in the circumstance, “We should immediately make available these funds if we can spend so much on elections and in addition introduce a policy that would enable passengers to elect without compulsion on the form of payment either in Naira or dollars”.
This, he said would free dollars into the Central Bank of Nigeria (CBN) and reduce the pressure on demand for foreign exchange.
He equally stated that this would make the airlines subsequently release most of the inventories that are presently removed from the market and increase the supply side.
Some African countries he said facing similar difficulty had adopted the system, hinting that the nation’s image on disregard for the sanctity of contract would significantly improve and shore up investors’ confidence.
Olowo also took a hard look at the Murtala Muhammed International Airport terminal and called for the immediate stripping or pulling down of the facility and rebuilding.
“Murtala Muhammed International Airport which is Nigeria’s number one airport built in 1978 should be shut down, stripped 100 percent, and rebuilt. It remains a national disgrace and an eyesore when speaking about the world’s contemporary modern airports. Fingers A, B, and C as in the original masterplan should be added like yesterday. Aerotropolis can then come to compliment the airport”.
“Aerotropolis cannot adequately the junk we currently parade as an airport. This should be the order of priority. We must be intentional about the birth of two to three strong flag carriers to compete and be designated to all destinations. All political and economic solutions are needed to achieve these tasks that must be done. Efficient and effective service delivery will follow, tariff will fall and reciprocity will be easily achievable”.
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