Market News

Airfares across local destinations in Nigeria have continued to rise, leading to a drastic drop in the influx of passengers arriving and departing from airport terminals across Nigeria.

A recent visit by BusinessDay to the three busiest terminals in Nigeria — Murtala Muhammed Airport, Lagos (MMA2), General Aviation Terminal (GAT), Lagos and Abuja local airport terminal — shows few passengers being processed to travel.

In most cases, only arriving passengers are present at these airports, as most airport workers decry low patronage because of rising fares.

“The past two weeks have been like this. Once the first and second flight leaves the airport, passengers become scarce. Most times, we struggle to fill up the aircraft and even when we delay the flight for an hour or more, the passenger number will still be sparse and discouraging,” an airline staff told BusinessDay.

The staff also disclosed that in recent times, airlines have had to help one another airlift passengers going to the same destinations and share proceeds from the flight to avoid rising operational costs.

“Aviation fuel is costly now and airlines sell tickets in naira but pay for spare parts and tickets in scarce dollars. It would be bad economics for an airline to have an aircraft with 150 passenger capacity to carry just 50 passengers on the flight. It will only amount to losses.

“It only makes sense for the airline to partner with another to airlift passengers as long as they go to the same destinations. This will reduce costs and help save money” the staff said.

BusinessDay’s findings show that aviation fuel currently takes about 45 percent of the operating cost; labour takes 17 percent; aircraft rent and ownership takes 8.5 percent; non-aircraft rents and ownership, 7 percent; professional services, 4.5 percent; landing fees, 2 percent; food and beverage, 1.5 percent; maintenance materials, 13 percent, and transport related, 1.5 percent.

It cost about $3,000 to operate a B737 aircraft on a one-hour flight when aviation fuel was less than N100 per litre about five years ago. Similarly, when aviation fuel increased to N200 per litre, airlines operated a B737 aircraft at about $6,000.

BusinessDay’s findings show that with the current exchange rate and increase in aviation fuel, which currently cost about N1,300 per litre, airlines operate a B737 aircraft for over quadruple that amount.

Airlines are also faced with increasing naira to a dollar rate pushing the cost of fares up.

BusinessDay’s findings show that a one-way economy class ticket from Lagos to Abuja which cost N55,000 a few months ago now costs between N100,000 to N150,000 on Air Peace; N90,000 to N160,000 on United Nigerian Airlines; N70,000 to N130,000 on Dana Air and N170,000 to N200,000 on Ibom Air.

A one-way economy class ticket from Lagos to Abuja which cost about N50,000 some months back now costs N105,000 to N160,000 on Air Peace, N95,000 to N120,000 on United Nigeria Airlines, and N175,000 to N200,000 on Ibom Air.

A one-way economy class ticket from Lagos to Port Harcourt which cost about N55,000 some months back now costs N105,000 to N160,000 on Air Peace, N85,000 to N100,000 on United Nigeria Airline, N65,000 to N125,000 on Dana Air, N96,000 to N130,000 on Ibom Air and N86,000 to N170,000 on Arik Air.

Mazi Osita Okonkwo, Chief Operating Officer (COO), of United Nigeria Airlines said “Currently, aviation fuel has increased to N1,300 per litre or even more. Forex is over N1,000 for one dollar. So, if we are leasing aircraft, how do we pay for the aircraft, having paid for spare parts? The minimum cost of airfare should be $100.

“So, I don’t even see how you can fly for less than N150,000 and you will make a profit. Anybody telling you he is making it is not telling you the truth. Once the cash runs out, you will see operators parking their aircraft as some have done already.

“Today, we had other operators saying they wanted to transfer their passengers into our aircraft because it doesn’t make sense to fly 50 passengers in a 150-seat capacity aircraft. People are burning cash,” Okonkwo said.

He called on Festus Keyamo, the Minister of Aviation and Aerospace Development, to intervene.

He said local airlines need cheap loans, forex, and lower country risk as lessors will charge more when operators are from Nigeria, whereas, operators from other countries get cheaper insurance.

Ndukwe Ginika Ogechi, CEO Geena Travels And Tours Ltd also told BusinessDay that the turnout of passengers on local destinations has been scanty lately as a result of the costs of tickets.

“The aircraft on local destinations are barely full these days because people cannot afford the fares, yet these airlines have refused to reduce fares. I’m not even sure they make profit anymore as a result of low patronage,” Ginika said.