Airline operators raise alarm over existential business threat

Sade Williams/Business a.m.

Domestic airline operators in the country are facing existential threat challenges, their organised body, Airline Operators of Nigeria (AON), has cried out.

According to the AON, members face challenges ranging from scarcity of foreign exchange, high price of aviation fuel and difficulty acquiring aircraft due to country risk profile.

The operators also pointed out that the aircraft that are due for maintenance have been grounded and cannot be ferried overseas because of the scarcity of forex, so there is continuous depletion of equipment without replenishment and warned that if this continues the country may not have operating aircraft for domestic services.

Obiora Okonkwo, spokesman of AON, who outlined these challenges, said that airlines need urgent government intervention without which many airlines would go under and the government would be their undertaker.

The airlines said the lack of stability in foreign exchange and the soaring price of aviation fuel, which is now N1,300 per litre, have eroded their ability to plan; created uncertainty and precariousness in their operations.

Okonkwo, who is also the chairman of United Nigeria Airlines, explained that travellers who bought forward tickets in 2023 when aviation fuel was N700 per litre and exchange rate was N800/$1 would be airlifted at the current price of aviation, N1,300 per litre and exchange rate of N1400/$1; so, the airlines are recording huge losses on those tickets.

“We are making losses on factors that are beyond our control. We are not only faced with the problem of scarcity of dollars; even the aviation ecosystem is feeling the heat. Handling companies have increased the cost of their services, airports have increased their charges and those that service the aircraft have also increased the cost of their services. The monies for these payments are coming from the passengers who are already exhausted financially,” he said.

He said that many businesses in Nigeria are making poor returns so those entrepreneurs who are the crux of passengers that travel during the high and low season are no longer travelling and those who travel on tourism and social engagement are not enough to provide airlines good load factor to sustain their operations at the current low season.

“Passenger traffic has shrunk because even those on social engagement like weddings, burials and other ceremonies may not be inclined to spend money on flight tickets; they would rather send credit alerts to those hosting the events who would appreciate such gestures. So, they pay instead of appearing in person,” he said.

Okonkwo said that the airlines want to engage with the government to see how the government can intervene to save the airlines, noting that presently the government may not understand how perilous the situation is to airlines.

“Air travel is a catalyst to economic development. There should have been government engagement with airlines at different levels. Airlines do not have special forex allocation; so, they buy at the same place traders who trade Brazilian hair, textiles and others buy. Our passion to remain in this business is being eroded. We are at the point of oxygen supply. Some airlines are going into a coma. Our equipment is diminishing. The minimal revenues we earn to keep the airlines flying, we convert to pay our lessors.

“It is impossible to bring in more aircraft. Aircraft owners have become sceptical because of country risk. A Nigerian airline may meet their terms, all the standard criteria but the aircraft owners consider country risk above other factors. Country risk supersedes everything and lessors have their own obligations. So, there is nothing personal. Some airlines deposited money with the Central Bank of Nigeria (CBN) but they cannot provide us the needed dollars,” he added.

He also noted that there are fixed costs which airlines must pay whether they fly empty or with passengers, noting that even if an airline borrows money to support the current downturn, the interest rate is still at 26 percent, reiterating that airlines need special allocation of dollars for them to survive because airlines need dollars to buy aircraft, maintain their fleet and order spares.