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Nigeria Lost N48bn to Operational Hiccups in Aviation Sector in 2016

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  • Nigeria Lost N48bn to Operational Hiccups in Aviation Sector in 2016

It has been projected that airlines, air travellers and aviation agencies lost about N48 billion in 2016 to operational hiccups, inadequate supply of aviation fuel and the attendant high prices.

These losses were said to have been incurred by passengers who lost businesses due to flight delays and cancellations; airlines that cancelled flights after expending money on logistics and equipment and aviation agencies that lost accruals on charges because of limited flight traffic due to paucity of the product.

Industry operators who spoke on the condition of anonymity, said that the losses were really difficult to quantify because it made travellers to lose confidence in the airlines, which the travellers have to pay almost double what they used to pay because the airlines have to pass exorbitant prices of aviation fuel to the passengers.

A chief executive officer of one of the airlines, explained: “Honestly we are trying our best to pass the cost of aviation fuel to the passengers; otherwise, we will not be able to operate. We cancelled flight last Sunday. We waited for two hours for aviation fuel, by the time the product came it was late to travel to our destination because that airport does not have airfield lighting so we cannot land there after 6:00 pm. We rescheduled the flight the following day at extra cost to the airline and the passengers,” he said.

The official noted that flight delays and cancellation make people lose their business appointments, scheduled business meeting and disorganize many other things lined up to be accomplished.

“It has a debilitating effect on the economy. We see huge increases in the cost of aviation fuel and we pass that cost to the customers or we will be out of business. Now passengers are rushing to the airports because of the season, but what happens in January after the Yuletide season?” the official asked.

The Director of Consumer Directorate of the Nigerian Civil Aviation Authority (NCAA), Adamu Abdullahi said passengers are bearing the brunt of aviation fuel scarcity and high prices.

“The traveller cannot meet up with his appointment. On international flights their bags are left behind because the aircraft will have to take more fuel and they cannot leave their bags so they wait for them to arrive. The airlines cannot even be held responsible because we have what we call force majure. The aviation fuel scarcity issue is even beyond the aviation industry,” Abdullahi said.

He noted that the essence of travelling by air is the gain the advantage of speed but this is defeated when the passengers spend hours to even board a flight and sometimes the flight is cancelled.

“The airlines don’t make money when aircraft are on the ground. So the airlines are losing and NCAA is also losing because the five percent charge is deducted from the ticket that has already been used,” he said.

A major operator said that although airlines pass the high aviation fuel price to the passengers but they don’t pass everything to the travellers; because if they do the price of air ticket would go beyond the reach of many of the citizens that are currently travelling by air.

“It will be very difficult to put figures on the losses because it is enormous. Every airline that cancels flight has lost the confidence of his passenger. A passenger who experiences flight cancellation or delay will share his experience with others. So anytime you delay you lose a passenger and if it is international flight, the delay may make you lose your landing slot, which means you will have to cancel the flight. When you delay for a certain number of hours you will have to lodge your passengers in a hotel and if you are operating a chartered flight you will still have to pay for the time you did not fly the aircraft.

“I think that the only people who may be gaining in all these are the oil marketers; all others are losing. The country is losing, the airlines are losing and the aviation agencies are also losing. The economic loss is too enormous,” the operator said.

Aviation fuel scarcity started in January till December this year and it is in 2016 that the product was sold as high as N240 to N310 per litre.

Even now that the Nigerian National Petroleum Corporation (NNPC) has announced that it had imported about 123,000 tons of the products, airlines believe that it would still take time before the product arrives Nigeria.

“It is a little too late, one of the airline bosses said.

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

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude oil

Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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