A combination of higher cost of jet fuel, naira devaluation and foreign exchange scarcity has caused Nigerian airlines to double fares in a week, the biggest spike compared to other major African countries.
Airlines operating in major African countries such as Egypt, South Africa and Ghana are finding innovative ways to break even and survive the effect of the coronavirus pandemic without necessarily increasing cost of airfares, unlike their Nigerian counterparts who continue to add more financial pain to travellers due to harsh operating environment.
For instance in Ghana, the domestic airspace dominated by two operators, Africa World Airlines (AWA) and PassionAir, who carry 70 percent and 30 percent of passengers, respectively, have increased frequency in response to demand rather than hike airfares.
Rather than increase airfares to meet increasing demand for domestic air travel brought on by the need for safe, less crowded, efficient means of transport and increased political activity, AviationGhana magazine reports most operators are calling for the need for more domestic airlines.
AWA, for instance, announced four daily return flights each to Kumasi and Tamale from Accra, starting June, in addition to the two weekly flights to Takoradi. PassionAir, on the other hand, also added a second flight to its initial one flight a day on Mondays and Fridays to meet the weekend demand.
Also, the aviation industry regulator, Ghana Civil Aviation Authority (GCAA), held meetings with the management of major airlines to ascertain the challenges and the support they require to restart operations.
In South Africa, the country’s major airline announced in September it has increased airfares by just 6 percent mainly due to the country’s inflation of 3.2 percent.
In Egypt, the country’s national carrier EgyptAir has said it won’t hike fares in the current period or after the coronavirus crisis ends, meaning there won’t be any surge in fares.
In Nigeria, air travellers have had to pay through their nose due to a 100 percent increase in airfares by domestic airlines who are in financial straits thanks to high cost of operations, especially forex challenges which affect the airlines’ ability to pay for spares, maintenance, training and aircraft acquisition in dollars.
The airlines are also faced with high-interest rate for loans, comparatively outrageous insurance premium and the huge burden of aviation fuel that has left them disadvantaged among international carriers.
Ikechi Uko, a travel expert, told BusinessDay that the reason airfares may be high in Nigeria and low in other countries could be that airlines in other countries operate international routes which they use to subsidise local routes for airfares.
Ethiopian Airlines, for instance, makes money in international routes but subsidises its fares locally, just to encourage citizens to travel, Uko said.
He explained that this may not be the case for Nigeria because domestic carriers in Nigeria apart from AirPeace do not operate internationally, so most of their earnings are made locally.
BusinessDay finding reveals Nigeria’s economy tickets more than doubled in some major routes mostly due to a surge in demand. For instance, an economy class ticket from Lagos to Benin (one way) sells for N60,000 (or $157 using the official exchange rate of N380/$)) while a return ticket sells for N120,000 ($315). Another ticket from Kano to Abuja sells for N95,000 ($249).
In Ghana, an Accra-Tamale return flight costs about GH¢950 ($161); Accra-Kumasi and Accra-Takoradi return flights cost between GH¢800 ($136) and GHC 900 ($153).
In South Africa, one-way flight from Johannesburg to Durban costs about $46, Johannesburg to Cape Town costs about $84 while in Egypt a one-way flight from Cairo to Alexandria costs around $171.
But Nigerians are paying as high as N100,000, an equivalent of $263 for a trip of less than an hour.
Ado Sanusi, managing director/CEO of Aero Contractors, who confirmed the increase in airfares, told BusinessDay that all commodities in the market have increased, so airlines also have to reflect this on prices of tickets.
For instance, aviation fuel, otherwise known as JetA1, which currently accounts for between 35 to 40 percent of the total operational cost of an average airline, costs as high as N300 per litre in Nigeria, especially in the Northern part of the country, although it sells at N240 and N250 per litre in Lagos; in Ghana, the product costs as little as N120.
Sanusi explained that the economy of the country is struggling, and there are so many indices that reflect on airfares. Some of the indices, he said, include strength of the naira against the dollar, economy of the country and increase in commodities and services, amongst others.
“When we were in lockdown due to COVID-19, we thought that passenger confidence may be minimal but surprisingly, passenger confidence was higher than what we expected. We started with a load factor of between 50 to 60 percent and we charged the same airfares during the pre-covid era,” Sanusi said.
“As we started opening up and began to realise the effect of COVID-19 and the economy on our operations, we had to increase fares. There has been an increase in the cost of spare parts, aircraft lease, Passenger Service Charge (PSC) and services generally provided by service providers,” he said.
The Federal Airports Authority of Nigeria (FAAN), in August, increased PSC by 100 percent from N1,000 to N2,000 for domestic travellers while international travellers have had to pay $100 instead of $50. This service charge will be included in airfares of passengers.
These realities ensure that domestic airlines operate on a very thin margin and with further increase in the price of local airfares by as much as 100 percent as Nigerians book tickets ahead of the Christmas holiday. However, for most African countries, the situation is not the same.
Tayo Ojuri, managing partner, Aglow Aviation Support Services Limited, told BusinessDay that the rate of the dollar to the naira affects airfares.
Nigeria has devalued its exchange rate three times this year already, going first from N305/$1 to N360/$1 and then to N390/$1. The exchange rate at the black market is currently at N475/$1 and rose as high as N502/$1 last week.
Before the pandemic, Nigeria’s indigenous carriers had been seeking government support, urging permanent waivers on tariffs on imported aircraft and spares, exemption from VAT payment and upgrade of airport facilities, especially installation of airfield lighting at airports so that they can fly for longer hours.
But with the coronavirus pandemic disruptions, stakeholders say it has become critical that airlines need financial help from the government to survive.
Olumide Ohunayo, an aviation analyst, told BusinessDay that aside from providing monetary bailout, the government can work with the banks to put a moratorium on all outstanding debts, interest rates, loans and principals for about one year to help airlines recover quickly.
According to the International Air Transport Association (IATA), airlines are expected to post a loss of $84.3 billion in 2020 and financial relief from government remains a lifeline to many airlines.