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

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.