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Aviation Crisis Deepens as Arik Suspends Operations – FG May Intervene, Says Ministry Official

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Hundreds of passengers of Nigeria’s biggest airline, Arik Air, were left stranded at airports across the country and beyond on Tuesday because of suspension of flight operations by the carrier.

Arik is having problems with the renewal of its insurance policy.

At the Murtala Muhammed International Airport, Lagos, and the Nnamdi Azikiwe International Airport, Abuja, it was observed that all the ticketing and reservation stands of the airline were closed and customers were directed to other carriers.

Airport officials told one of our correspondents that the carrier had been having issues for some time and that these were affecting its smooth operations.

The airline said in a statement that the development was caused by documentation issues relating to the renewal of its insurance policy.

It said the delay in renewing the insurance policy was caused by the two-day holiday, which was declared by the Federal Government to celebrate the Eid-el-Kabir.

Arik said the suspension of flights might  continue for the next few days until the approval of a waiver on a priority basis by the National Insurance Commission for a new insurance company to renew the policy.

It added that during the period of the disruption of operations, the management of the airline would be working hard to resolve the necessary documentation issues.

The statement read in part, “Arik Air, West and Central Africa’s largest airline, has alerted all air travellers of a temporary disruption to its operations pending approval of aircraft documentation related to insurance renewal. The airline said that it was working around the clock to resolve the necessary documentation, which has been a challenge due to the long weekend holidays.

“At the present time, all flights of the airline have been cancelled for Tuesday, 13 of September, 2016, and the airline has stated that it would be getting in touch with passengers to provide an update on rescheduling of their flights.

“This situation is likely to continue for the next few days until such time that NAICOM approves a waiver on a priority basis for the new insurance company to renew the policy.”

The airline however advised its customers to visit either its website or any of its ticket offices to know the status of their flights before proceeding to airports.

Arik Air’s Group Chief Executive Officer, Dr. Michael Arumemi-Ikhide, said, “The airline wishes to advise and assure the public, its customers, stakeholders and partners that we are fully committed to returning to our normal operations and minimise any unfortunate inconvenience to our passengers.

“Where flights have been cancelled, the airline will notify passengers through SMS and in such cases, passengers will be accommodated on first available alternative flights as soon as normal flight operations resume.

“The Group CEO apologised and appealed on behalf of the airline for the understanding of passengers, while it works diligently to resume normal operations at the earliest time.”

The Nigerian Civil Aviation Regulations kick against any airline operating an aircraft that has insurance issues.

Part 18.11.2 of the regulations dealing with aviation insurance states that “no person shall operate any aircraft in the public air transport category without adequate and valid insurance cover.”

Part 18.11.2.2 of the regulations states that “any person having a duty to maintain adequate insurance shall submit to the Authority on quarterly basis insurance certificates, evidence of paying premium and policy documents.”

However, the Assistant Director, Corporate Affairs, National Insurance Commission, Mr. Salami Rasaaq, said that NAICOM did not have any direct business with Arik Air but with its insurance company.

According to him, the commission did not delay the insurance of the aircraft because the request for the Approval in Principle was only submitted to it on Friday afternoon after the close of work.

“When you submit a request, there is due process to follow before you give an approval. A staff member on special risk had to go to the office today (Tuesday), which is a public holiday, to work on it, and we gave them one-month approval effective from today (Tuesday) to expire on October 12, by which time they are expected to do everything possible to get the one-year approval,” he said.

Rasaaq explained that the commission had specified a minimum of 10 days to the expiration of the policy for the request for the AIP.

“Because they were supposed to have applied 10 days before, which is the minimum to the expiration of the AIP, but the airline did not comply. But even if they did, the commissioner has said we will always work on it because of the interest of the public,” he said.

  • Aero and First Nation

The disruption of Arik’s operations is coming about two weeks after Aero Contractors Airlines Nigeria’s second largest commercial carrier, and First Nation Airlines announced the suspension of operations.

In the case of Aero, the airline had in a statement stated that the suspension was part of the strategic business realignment to reposition it and return it to the path of profitability.

It explained that this business decision, which was as a result of the current economic situation in the country, had forced some other airlines to suspend operations or pull out of Nigeria.

For First Nation, the Director-General, Nigerian Civil Aviation Authority, Capt. Muhtar Usman, had explained that the decision was taken in order to ensure that the airline carried out the required maintenance of its aircraft.

The NCAA DG had said, “First Nation Airline on its part is in the middle of an engine replacement programme for one of its aircraft. Another aircraft is due for mandatory maintenance as allowed by the regulatory authority.

“In these circumstances, these airlines clearly cannot continue to undertake schedule operations, hence the inevitable recourse to self-regulatory suspension.”

  • Foreign carriers boycott Nigeria’s fuel

Meanwhile, the scarcity of aviation fuel occasioned by dollar shortage has made the price of the Jet-A1 fuel to rise by 81 per cent from N220 per litre to N400, Reuters has reported.

This came barely two months after the price of the commodity, which contributes 30 per cent of airlines’ cost of operations, increased from N120 t0 N220 per litre.

The latest increase has made foreign airlines flying into Nigeria to start boycotting the country to refuel, according to Reuters.

It is the second blow for airlines operating in the nation’s recession-hit economy in a year. The Central Bank of Nigeria’s naira peg had made it almost impossible for them to repatriate profits from ticket sales as it tried to prevent a currency collapse.

The crash in the naira since a devaluation in June has led firms who market jet fuel locally, such as Total, Sahara and ConocoPhillips, to double the price to N220 a litre in August, and to as much as N400 presently, an airline executive told Reuters.

A Deputy Director at the Ministry of Aviation, James Daudu, said Jet-A1 prices were deregulated, and therefore outside government control, but stated that the Minister of State for Aviation, Mr. Hadi Sirika, was working with the Ministry of Petroleum Resources to see if “interventions” in the sector were possible.

“It would be a whole sphere of intervention, if possible, from the Central Bank of Nigeria to the Ministry of Petroleum Resources,” he said.

Even at the higher costs, marketers’ lack of dollars has made fuel scarce. Some carriers have had aircraft stuck, or were forced to cancel planned journeys, after frantic last-minute calls from ground staff warned that there was no fuel available.

“The economy is crying out for investment, and now it is going to be even harder for anyone to visit,” an economist with Capital Economics, John Ashbourne, said.

“Who is going to want to park a billion dollars in a country that you can’t even easily fly to? It sends the worst possible signal,” he added.

A spokesman for the Nigerian National Petroleum Corporation did not answer calls for comment.

The central bank hoped floating the naira would attract dollar inflows, but the naira has sunk by 50 per cent, forcing oil firms to charge airlines, stuck with piles of naira, in dollars for jet fuel.

“It’s an impossible situation. The oil marketers don’t want to sign long-term agreements anymore so we have to accept whatever prices they demand,” one airline executive said, adding, “We sell tickets in naira and now they want us to come with dollars.”

Spain’s Iberia and United Airlines cancelled their Nigeria services earlier this year, and two local carriers also halted operations. Other international airlines responded by boosting ticket prices within Nigeria, charging their globe-trotting elite as much as $2,000 for an economy class ticket to Europe to cut losses – more than double the cost of a Lagos ticket bought abroad.

Dubai-based Emirates has started a detour to Accra, Ghana, to refuel its daily Abuja-bound flight, a spokesman said. The airline already cut its twice-daily flights to Lagos and Abuja to just one.

The move was aided by a substantial drop in Ghana’s jet prices amid tax reform last month, according to the Ghana Chamber of Bulk Oil Distributors.

Air France-KLM said it was refuelling abroad in “very exceptional cases” by juggling suppliers and stomaching extra costs.

Germany’s Lufthansa is loading more fuel in Frankfurt for its Lagos flight, where the ground staff doubt their ability to refuel for the final destination of Malabo, the capital of Equatorial Guinea, an executive said. The airline did not respond to official requests for comment.

The scarcity has even pitted airlines against local consumers; a surge in demand for cooking and heating kerosene during the rainy season, when households cannot easily burn wood or charcoal, means if the airlines do not pay up, marketers will sell to locals.

Airlines met with Transport ministry officials last week in Abuja to press for lower fuel prices, industry sources said.

Nigeria used to be one of the most profitable markets for foreign airlines, landing planes with plenty of first and business class passengers to cater to executives and officials jetting around under former President Goodluck Jonathan administration.

British Airways, a popular choice for well-heeled Nigerians, said it was using smaller aircraft on its Lagos-London route, as did Air France-KLM.

Turkish Airlines’ use of smaller planes has added another inconvenience: passengers complained there is not always space for luggage on the smaller aircraft, delaying it for days. The airline did not respond to requests for comment.

  • Ooni’s botched visit to Sanusi

Members of the Yoruba community in Kano went back home disappointed on Tuesday after waiting in vain for the arrival of the Ooni of Ife, Oba Adeyeye Ogunwusi, at the Mallam Aminu Kano International Airport.

As part of activities to herald the monarch into the city of Kano, members of the Yoruba community, including a dance troupe, besieged the airport early in the morning to accord him a warm reception but dispersed disappointed after waiting for several hours.

The President of the Yoruba community in Kano, Alhaji Abdullatif Faisu, said that the trip was aborted at the 11th hour due to problems with the Ooni’s chartered flight.

The Ooni’s advance party was earlier at the airport awaiting the monarch’s arrival, but left with the gift that was to be presented to the monarch when it became apparent that Ogunwusi would no longer make the trip.

Another set of crowd, who had earlier assembled at the emir’s palace, later dispersed when it became evident that the Ooni’s trip had been cancelled.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021

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Nigeria's economic Productivity

OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Crude Oil

Brent Crude Oil Rose to $56.25 Per Barrel

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oil

Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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