Nigerian carriers are bleeding cash and flying at a loss as the ongoing Middle East conflict has pushed up aviation fuel prices by about 80 per cent, airline operators have disclosed.
The crisis, triggered by the escalation of hostilities between US-Israeli forces and Iran since February 28, has disrupted shipping through the strategic Strait of Hormuz—a conduit for about 20 per cent of the world’s oil and gas. Global crude prices have skyrocketed past $100 per barrel for the first time in four years, with Brent crude rising more than 60 per cent.
Spokesman of the Airline Operators of Nigeria (AON), Prof. Obiora Okonkwo, said the price of aviation fuel, also known as Jet A1, has soared to about ₦1,800 from ₦1,000 per litre sold before the war started, reflecting an 80 per cent surge.
Speaking in an interview on Arise News on Wednesday night, Prof. Okonkwo, who is the chairman of United Nigeria Airline, said aviation business is very vulnerable such that any little thing could affect operations and costs.
“As regards us in Nigeria, before the war, we were getting aviation fuel at about 1,000 Naira per litre. As we speak right now, the last fuel we had this evening was going for about 1,800 naira, which is quite astronomical. We’re still battling how to deal with it,” Okonkwo stated.
Airlines Absorbing Losses to Keep Passengers Moving
There are concerns that aviation fuel, which previously accounted for about 30 to 35 per cent of total operational costs, has, with the current prices, jumped to between 40 per cent and 45 per cent. Industry checks reveal that aviation fuel prices now vary significantly across the country’s airports. At Murtala Muhammed Airport, Lagos, Jet A1 sells for about ₦1,500 per litre; at Nnamdi Azikiwe International Airport, Abuja, it costs ₦1,600; while airports in Calabar, Port Harcourt, and Kano are reporting prices of ₦1,700 and above.
Despite the rising cost burden, Nigerian airlines continue to operate, with many at a loss.
Okonkwo said Nigerian airlines are currently losing money because, according to the Nigeria Civil Aviation Authority (NCAA) regulations, airlines can’t unilaterally hike airfares. According to him, Airlines are required to submit their inventories to the NCAA not less than two weeks before the implementation of any price increase is considered.
He said in the meantime, airlines continue to operate at a loss, adding that this period, (shortly after Christmas season), is usually not the highest season for air travelers as passenger load drops to about 40 or 60 per cent.
“So, we are really in a very difficult situation right now. You can’t just wake up and say, I’m doubling or tripling my fare despite the new aviation fuel price hike. Today, you can still buy a ticket to some destinations for 100,000 naira or less. So, this is that moment that when I tell Nigerians that there are occasions the airlines fly and lose money, this is that moment we are carrying you at our own expenses,” Okonkwo lamented.
READ ALSO:
Middle East Airspace Closure Triggers Mass Repatriation as Airlines Scramble
Middle East Tensions: Concerns as Fuel Prices Rise in Nigeria After Oil Price Surge
U.S.-Iran War: More Pressure on Domestic Fuel Prices as Oil Rises Above $100
Why Nigerian Airlines Struggle with Operating International Flights
He said airlines are offering essential services, and times like this demand that they must have the financial chest to absorb the extra cost without shutting down, waiting for a time when things would normalise.
Speaking on the challenges of airlines, the AON spokesman said apart from multiple charges and taxes by agencies, high interest rates on loans from banks also significantly affect the cost of tickets and their operations generally.
Highlighting the tax burden on airlines, Okonkwo said United Nigeria Airlines paid about ₦ 1.5 billion bill to NCAA alone just for December operations. “You can imagine if I’m not paying that money to the NCAA, I will return it, pass it on to the passengers and strengthen my operations. But one thing beyond all those charges we are talking about is the interest rate. The average interest rate you get from any bank in Nigeria, average for any operator, is about 30 per cent.
He said that because investing in the aviation business is very expensive, airlines are forced to borrow billions of naira and paying about 30 per cent interest rate for such a huge amount of money takes a heavy toll on them.
This, he said, makes it difficult for the Nigerian airlines to effectively compete with other operators outside the country who are getting interest rates of 3 per cent or 5 per cent.
“So, I believe that all these things, including the other charges, affect the ticket price and the margin in this business. That’s why many operators are finding it difficult to survive,” he stated.
He also called for urgent government intervention, including a special arrangement with Dangote Refinery to supply aviation fuel at discounted rates.
“We would want a situation where the government will have to make a deal with Dangote and then offer him some crude at a special rate and then at a dedicated price for the aviation airline operators,” Okonkwo said.
This he said, would go a long way in reducing the financial pressure faced by airline operators in the interim.
In the long term, the industry seeks a special intervention fund with single-digit interest loans for aircraft acquisition and other operations.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
