Airlines’ nine new planes fail to moderate rising fares

Nine new planes recently added to the fleet of Nigerian airlines have failed to moderate rising fares, forcing consumers to rethink their options ahead of Christmas.

BusinessDay had last week reported that airlines were bringing in aircraft to feed local routes and meet rising demand ahead of the Christmas period.

However, the boost in fleet is yet to reflect on air fares as high operating and maintenance costs continue to asphyxiate domestic airlines, putting pressure on their long-term sustainability and forcing fares up.

“If you want to make it a prayer point for fares to come down, you should pray for naira to be stable because some of these things are benchmarked against the naira and the cost of aviation. The lower the value of naira, the higher the cost of aviation fuel, and the higher the cost of operations in naira,” Obiora Okonkwo, chairman/CEO, United Nigeria Airlines, said.

Read also: Airfares jump 250% in 12 months amid Christmas bookings

Okonkwo stressed that whatever passengers are paying currently is still subsidised, considering the costs of operations.

United Airlines recently acquired one Embraer 190 aircraft, while Xejet joined scheduled operations with four aircraft. Ibom Air brought in two CRJ 900s planes, with Air Peace boosting its operations with two aircraft that recently returned from maintenance outside Nigeria.

“A minimum base ticket for a 30 minute-flight in Malabo is about $150. If you want to buy a ticket and pay less than $150, somebody else subsidised your flight ticket. For any aircraft that takes off, even if it takes off for a 15-minute flight, an airline is paying the full amount it will take for an aircraft to take off and land,” he said.

“If you put on reserve $1,000 per cycle, it will cost you the same reserve on the flight you made from Abuja to China as the flight you made from Victoria Island to Ikeja. Everything about aircraft has to do with taking off and landing. It is not about how long you are in the air,” he explained.

Air fares across destinations in the country have risen to over 200 percent as Christmas approaches.

While routes like Abuja and Lagos flown by more airlines seem to see a slight reduction with an average fare of N130, 000 for a one-way economy class ticket, fares for other routes have continued to rise.

Outbound and inbound one-way economy class tickets from Lagos to Enugu, Owerri, Port Harcourt and Asaba, which sold for an average of N100,000 by this time last year, now sell for an average of N170,000 to N350,000.

Some domestic airlines charge between N170, 000 to N400,000 for one-way economy class tickets from Lagos to frequently flown destinations.

According to the recent National Bureau of Statistics (NBS) transportation report, domestic airfares rose by 57.81 percent, from N79, 013.48 in September 2023 to N124,693.40 in September 2024. On a month-on-month basis, the fares rose by 0.80 percent from N123,700.14 in August.

Nigerian airlines are highly exposed to the foreign exchange market as most of their transactions are carried out in dollars. And with the foreign exchange crunch in Nigeria, which has worsened in the last one year, airlines appear to be struggling to keep their planes in the sky.

Cost of operations are high, particularly as aircraft maintenance is done outside Nigeria. Coupled with this is multiple taxation from government agencies, which are affecting airlines’ bottom-lines.

Read also: Airfare: Flying beyond reach

BusinessDay’s findings show that aviation fuel currently takes about 45 percent of operating cost, while labour gulps 17 percent. Aircraft rent and ownership take 8.5 percent, while non-aircraft rents and ownership gulp 7 percent. Similarly, professional services take 4.5 percent, while landing fees gulp 2 percent.

Food and beverages take 1.5 percent, while maintenance materials gulp 13 percent.

“Foreign exchange issues have a direct ‘negative’ impact on the sustainability of any domestic airline in Nigeria. This FX issue has three direct effects on the domestic airlines,” Seyi Adewale, the chief executive officer of Mainstream Cargo Limited, told BusinessDay.

Adewale explained that, first, airlines need to procure practically all their spare parts and service materials in foreign exchange, noting also that the customs clearing exchanges are pegged to FX using presently high rates approved by the Central Bank of Nigeria (CBN).

He said airlines equally need the scarce FX to buy or rent new aircraft engines that require urgent replacements due to ‘bird strikes’ and other similar occurrences.