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Aviation: Increase in Operational Cost, Fuel Price May Raise Domestic Flight Fares

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The Federal Government of Nigeria has been charged to offer support to domestic airlines to avert the looming airfare hike in the aviation sector.

Investors King gathered that the airline tickets may rise as a result of the increase in aviation fuel which now costs N400 per litre and other operational costs which include airport charges.

Addressing journalists in Lagos on Wednesday, during the first anniversary of the United Nigeria Airline, Dr Obiora Okonkwo, the Chief Executive Officer explained that domestic airlines are operating in a difficult environment.

He stated that the cost of operations in the aviation sector is hindering growth as well as sunset operations at most airports where planes can not land at night.

“The industry has witnessed a lot of inconsistencies. The first ever flight we operated, we paid N190 for the first litre of aviation fuel. And as at today, aviation fuel is N400 per litre. The base price we sold ticket when we started was N23,000 when aviation fuel was N190. 

“The first foreign exchange transaction we did when we started was N340. But now, when it is available, it is N450 but when it is not available, the alternative black market cost is N570. It might surprise you to know that despite such increase, today, because of the market situation, you still can buy your ticket at N20,000 or N21,000.

“What this means is that since all the airlines are buying from the same market, any ticket at this rate is being subsidised by the airlines. Aviation fuel, depending on how it is applied in the aircraft, can easily become 30 to 40 per cent of the cost component of your operations,” Okonkwo said.

The CEO added that the charges paid to agencies and associations within the aviation sector need to be checked as most airlines are left with little penny after deductions, else an increase in airfare will be inevitable.

“For every ticket you sell, you pay five percent to the Nigerian Civil Aviation Authority (NCAA), there are other deductions to the Nigerian Airspace Management Agency (NAMA), FAAN and airport owners. By the time you remove all these deductions, you have to use your money to finish all of them and also take care of other operational needs. The only thing that covers these costs is the sales of tickets and how much these tickets are sold are very important.

“There would have to be an increase in fare. However, if some seats are lower in prices, you can cover it by the cost of higher seats. It is natural, so it is not what is discussed. Airline operators have resolved to find solutions to this because dealing with these problems individually has not yielded the desired results,” Okonkwo concluded.

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Canada Revolutionizes Express Entry: Introduces Targeted Draws to Address Labour Shortages

Canada’s Immigration Minister, Sean Fraser, has recently announced the implementation of category-based selection draws for candidates applying through the Express Entry system.

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Canada’s Immigration Minister, Sean Fraser, has recently announced the implementation of category-based selection draws for candidates applying through the Express Entry system.

This new approach aims to prioritize individuals with strong French language skills and work experience in specific fields that are in high demand across the country.

Under the revised system, candidates who possess expertise in healthcare, science, technology, engineering, and mathematics (STEM), trades such as carpentry, plumbing, and contracting, transportation, and agriculture and agri-food will receive preferential treatment in the selection process. These changes are expected to take effect later this summer to address the pressing need for skilled workers in various sectors across Canada.

Minister Fraser emphasized that these modifications to the Express Entry system are a crucial step towards meeting labor shortages reported by employers nationwide. By inviting more skilled professionals from targeted professions, Canada aims to support its economic growth while also fostering the vitality of French-speaking communities outside of Quebec.

The immigration minister highlighted the significance of immigration in alleviating labor shortages and enhancing the prominence of the French language within minority communities.

He stated, “Everywhere I go, I’ve heard loud and clear from employers across the country who are experiencing chronic labor shortages. These changes to the Express Entry system will ensure that they have the skilled workers they need to grow and succeed. We can also grow our economy and help businesses with labor shortages while also increasing the number of French-proficient candidates to help ensure the vitality of French-speaking communities.”

The introduction of category-based draws follows amendments made to the Immigration and Refugee Protection Act in June 2022, granting the minister the authority to select immigrants based on specific characteristics aligned with Canada’s economic priorities. The categories were determined through extensive public consultation with provinces, territories, industry representatives, unions, employers, worker advocacy groups, settlement provider organizations, and immigration researchers and practitioners.

To maintain transparency, the Immigration, Refugees, and Citizenship Canada (IRCC) will provide annual reports to parliament detailing the categories selected, the rationale behind the choices, instructions for establishing each category, and the number of invitations issued for each category.

Express Entry, launched in 2015, is Canada’s system for managing applications under three economic immigration programs: the Federal Skilled Workers Program, the Federal Skilled Trades Program, and the Canadian Experience Class. Candidates are evaluated based on various factors such as work experience, language proficiency, occupation, education, and more, using the Comprehensive Ranking System (CRS). Applicants with the highest CRS scores have the greatest likelihood of receiving an Invitation to Apply for permanent residence.

In summary, Canada’s adoption of targeted category-based draws for Express Entry candidates reflects its commitment to addressing labor shortages, supporting economic growth, and bolstering French-speaking communities across the country. These changes aim to ensure a more responsive immigration system that aligns with Canada’s social and economic needs, while also attracting highly skilled individuals who can contribute to the country’s prosperous future.

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Nigeria’s Aviation Industry Records Significant Growth in Recent Years Despite Challenges

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Nigeria’s aviation industry has recorded significant growth in recent years, with an increase in the number of aircraft, despite several challenges that have plagued the sector.

While maintaining a growth trajectory, reports reveal that the total number of aircraft in Nigeria has surged by 100% in 8 years, while the country’s number of airports has also increased significantly, currently numbering up to 40.

Speaking on the growth of Nigeria’s aviation sector, Director General and Chief Executive Officer NCAA, Capt. Musa Nuhu while speaking at the Federal Airports Authority of Nigeria (FAAN) National Aviation Conference (FNAC) with the theme: “Sustainability of the Aviation Industry In Nigeria”, stated that despite the challenges the industry has faced in recent years, ranging from regulatory, institutional and structural challenges, especially the breakout of the Covid-19 pandemic, aviation in Nigeria has so far been on a growth trajectory.

Mr. Nuhu further disclosed that when the Buhari administration came on board in 2015, there were only 34 Air Transport Licenses (ATL), but today, the number has increased to 73. He added that commercial certificates were just 196 but skyrocketed to 320 at present. Also, airstrips across the country had moved from 77 to 92, indicating an increase of 15 within the last 8 years.

Investors King understands that the aviation sector in Nigeria is one of the most rewarding for investors. The growing demand for aviation services in the country has encouraged many airlines to establish or plan to establish operations in Nigeria.

In 2022, the industry experienced a lot of developments as it worked to overcome various challenges it faced. A very notable development is the assent of the Civil Aviation Act 2022 by President Muhammadu Buhari.

The president stated that the implementation of the civil aviation act which is a critical aspect of ICAO will further strengthen the sector for improved safety.

Experts have disclosed that the adoption of the Civil Aviation Policy which centered on liberalization and Public Private Partnership (PPP) initiatives by the current administration had resulted in significant growth of the industry, including huge investments in the Nation Airports and has increased capacity of the airports and growth of the domestic airline industry.

They, therefore, emphasized that it is necessary for Nigeria’s aviation sector to remain sound, harmonized, and remain in compliance with the standards and recommended practices in the sector, noting that it is 100 percent regulated and Nigeria must comply with global practices.

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International Airfares Surge in Nigeria as IATA Exchange Rate Jumps 37.5%

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Travelling by air from Nigeria to other parts of the world has become significantly more expensive in recent weeks as the International Air Transport Association (IATA) has approved an exchange rate of N634/dollar for flight tickets sold in Nigeria.

This represents a 37.5% increase over the official exchange rate set by the Central Bank of Nigeria (CBN), which is pegged at N461.06/dollar.

This latest increase in the IATA exchange rate has led to a corresponding rise in airfares on the Nigerian route, which is set to worsen the financial burden on travellers ahead of the peak summer travel season.

It has also compounded the existing problem of foreign airlines being unable to repatriate their ticket sale proceeds out of Nigeria, due to a shortage of dollars from the CBN.

To mitigate the impact of blocked funds, international airlines in Nigeria have reportedly closed their low-price ticket inventory, further pushing up airfares.

A few months ago, foreign airlines sold tickets at N444/dollar in line with the CBN official exchange rate. However, in recent weeks, the IATA has reviewed the exchange rate for ticket sale in Nigeria to N462/dollar, N551/dollar, N582/dollar, N610/dollar and currently N634/dollar, even though the CBN official exchange rate has remained around N461/dollar.

While IATA officials justified the exchange rate increases, saying they were in line with the spot rates the CBN has been selling foreign exchange to foreign airlines in Nigeria for the repatriation of their ticket sale proceeds, travellers are likely to feel the pinch of the rising airfares.

Despite the significant increases in the IATA exchange rate, the amount of trapped funds in Nigeria has yet to reduce, according to the report.

As the summer travel season approaches, it remains to be seen how the situation will evolve and whether alternative solutions will emerge to address the challenges facing the aviation industry in Nigeria.

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