Airlines operating in Nigeria are failing to translate savings from falling fuel bills into lower airfares due to the nations sliding currency.
The naira weakened 1.34 percent to N196.40 per dollar as of 6:07 p.m. local time yesterday, which is a record low, widening losses over the past six months to 18 percent.
“The falling naira is leading to increased fares across various major international destinations,” said Bismarck Rewane, CEO of consultancy, Financial Derivatives Company (FDC).
“The only major route with a fall in fares is economy class for Lagos – Dubai, which is due to the price war between Emirates and Arik,” Rewane said.
International travellers from Nigeria are confronting fares that increased an average of 17 percent between December 2014 and January 2015.
The average return ticket on economy class for the Lagos – London route increased from N447, 720 per adult in December to N524, 160 in January.
The economy class on the Lagos – New York route rose by 17 percent to N656, 832 from N561, 044, while average prices on the Lagos – Johannesburg route also rose to N353, 280 from N301, 760.
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Airlines around the world are poised for a 25 percent increase in profits to $25 billion as the global oil crash cuts bills for jet fuel, according to the International Air Transport Association (IATA), the trade group for the world’s major airlines.
“Falling oil prices should help boost a weak global economy and lower average airfares by 5% in 2015,” IATA said in December.
Oil prices are down 50 percent since June 2014. The slide in the commodity which provides about 90 percent of Nigerian export earnings and 70 percent of government revenue has put pressure on the local currency, the naira.
The savings from oil will translate into the highest profit made by global airlines in 69 years, however Nigerian consumers have been missing out so far, because many international carriers from British Airways, Delta and Emirates are still filling seats without offering discounts, as demand for air travel continues to rise in the country.
In the second quarter of 2014, a total of 64,345 aircraft arrived and departed from Nigerian airports, which were an 11.55 percent increase from the first quarter figure of 57,681 aircraft, according to the most recent aviation sector report from the National bureau of Statistics (NBS).
International passenger traffic increased by 5.39 percent between the first and second quarters of 2014 to 1,122,090 passengers, the NBS data showed.
Fuel is often the largest expense for airlines, accounting for as much as one-third of total operating costs.
Jet fuel has fallen to $1.65 a gallon on Monday in New York, from a high of $2.82 in July 2014.
Domestic Nigerian airlines are mostly too fragmented to compete effectively with foreign airlines, compounding the problem of high fares.
PATRICK ATUANYA
