Domestic airlines suffer low patronage as fares soar

Domestic airlines have seen passenger traffic drop across routes in Nigeria on the back of skyrocketing prices of air tickets.

BusinessDay’s investigations show that the rise in ticket prices has discouraged many travellers from travelling in recent times.

After the suspension of passenger flights by Dana and Aero, there were expectations that few operating airlines with insufficient aircraft across Nigerian airports would result in passenger glut. But airlines are now facing low patronage across various routes as a result of the increase in airfares.

A visit to the local airports in Lagos on Wednesday morning showed a scanty terminal with few travellers processing their boarding passes as against the usual early morning surge of travellers.

A one-way ticket from Lagos to Abuja on Wednesday on Air Peace cost between N85,000 and N100,000 as against N35,000 charged in January 2022. The airline’s one-way ticket from Lagos to Port Harcourt cost between N80,000 and N95,000 as against N30,000 charged in January 2022. One-way Lagos-Kano flight also cost between N80,000 and N100,000 as against N40,000.

Green Africa, which started operations last year with Lagos-Abuja fares for as low as N18,000, currently charges between N76,000 and N89,000 on the same route. The airline also charges between N72,000 and N88,000 for its Lagos-Port Harcourt flight.

United Nigeria Airlines has also raised fares from N28,000 since February to N80,000 for Lagos-Abuja and Lagos-Port Harcourt flights.

“We have noticed that airlines now operate below 60 aircraft percent load capacity since ticket prices increased. Some airlines that have a very discouraging number of travellers booked on their flights even transfer passengers to other airlines to help them airlift, just so they don’t operate at a loss,” a protocol officer at the Murtala Muhammed Airport terminal told BusinessDay.

The protocol officer who wanted to be anonymous said it appeared most airlines were barely surviving and not making profit.

The aviation fuel crisis, which began in late February and deteriorated through the months of March to May, has further worsened and is currently threatening the ability of airlines to continue operations with the price of JetA1 rising from N200 in December 2021 to over N400 per litre in February. Currently, the price has skyrocketed to over N800 per litre.

Airlines have also continued to struggle with operating costs such as taxes, surcharges and maintenance costs, which have risen because of the scarcity of foreign exchange. Airlines carry out most of their activities in the US dollar, which today is in short supply.

BusinessDay’s findings show that aviation fuel currently takes over 65 percent of airline’s revenues, excluding multiple charges to aviation agencies, labour, aircraft maintenance and rent, non-aircraft rents and professional services, landing fees, among others.

Average fuel consumption on a Lagos-Abuja flight takes nothing less than 8,000 litres, depending on the aircraft. At N800/litre, airlines would be paying N6.4 million for fuel alone, apart from taxes, staff payment, service charges, etc.; and that is if the airline does not have to divert flight for weather or technical reasons.

If an airline load factor for a 200 passenger plane is 100 passengers, it means at the rate of N80,000 per ticket, airlines will make N8 million and spend N6.4 million only on aviation fuel. Airlines use the remaining N1.6 million to pay for other multiples charges from agencies, landing and parking costs, including five percent of ticket sales to the Nigeria Civil Aviation Authority, among others.

Read also: Airlines pay over 30 charges on an air ticket – Okonkwo

Obi Mbanuzuo, chief commercial officer at Green Africa, told BusinessDay that with few passengers travelling, the costs were not being covered but airlines could not just stop flying. “We just have to strive to reduce costs to the barest minimum,” he said.

According to Mbanuzuo, Green Africa is following the model to increase loads by reducing fares, especially when purchased early.

“Green Africa’s demand has also fallen in line with the market but with our more economical aircraft we are just about covering costs. But the current situation is not rosy at all,” he said.

Seyi Adewale, an aviation analyst and chief executive officer of Mainstream Cargo Limited, said if the airlines still maintain their fleet, especially those having eight aircraft and above, they will most likely be operating at a loss.

Adewale said passengers could eventually adjust to this higher air fare reality because a significant downward fares review is not imminent, adding that companies will plan their budgets to reflect the new air fare price realities and possibly scale down travel to tolerable cost value/frequency.

“Private travellers will have to plan more ahead before embarking on air travel. Air travel will remain a viable means of travel despite all odds, and it is still the catalyst for business and a very efficient means of transportation,” he added.

He said airliners would be better off if they retain the newly introduced average one-way rate of N50,000, with the noticeable good load factor they derived thereof.

He stressed that it would certainly take a long time for passengers to adjust to the newly recently introduced higher fares of more than N75,000 per average one-way, one-hour flight regime.

Obiora Okonkwo, chairman of United Nigeria Airlines, said when his airline started operations in 2021, aviation fuel was less than N400 per litre and it was already biting hard.

Okonkwo said: “After that, it increased to N600, yet airlines are operating in the same market; they buy from the same suppliers and the costs of operations are similar to all airlines.

“From the time we spoke up till now, there has been an increase of over 100 per cent in aviation fuel. It’s a tough market, and not only is there over 100 percent increase on aviation fuel; ground handlers have notified of an increase of cost of handling by 300 percent.”

“There are over 30 charges on every single ticket. So, if you have to really compute and make sure all those charges are captured, the minimum cost of a typical ticket for one hour flight in Nigeria should be over N130,000 in Nigeria,” he added.

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