Rising cost of fuel, weak naira assail aviation sector
The current scarcity and high cost of aviation fuel, coupled with the weak value of the naira have been identified as the main factors preventing the growth of the aviation sector.
While fuel alone gulps half of the operating costs, other challenges like the high cost of providing standard air transport services, increasing demand for customer satisfaction by air travellers and rising cost of operation, are giving the operators hard times, the Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Muktar Usman, said.
Usman, while delivering a paper entitled: ‘The acts of promoting a sustainable air transport economy while maintaining high level of aviation safety standards,’ at the Airport Business Summit and Expo, said that aviation fuel, otherwise called Jet A1, constitutes between 40 and 50 per cent of the airlines’ direct operating costs, which he said was having an untold effect on the performance and profit of domestic airline operators due to the supply crisis in the country.
Despite the astronomical crash in the price of crude oil from over $100 per barrel over a year ago to about $44 in the market today, domestic airline operators still purchase a litre of aviation fuel at higher price of N120 per litre, depending on the airport, marketer and the litres such an airline is purchasing.
“In other climes, price of aviation fuel is determined by the price of the crude oil in the international market, but the reverse is the case in Nigeria in spite of the fact that the product has been deregulated in the country for almost a decade,” Usman noted.
He stressed that with the obvious challenges, the nation’s airlines would not be able to compete with their counterparts in Europe and elsewhere, stressing that in almost three decades, revenue flow to airlines globally had dropped substantially in the face of discontinued State funding, sustained deregulation, privatisation and intense competition.
Within the period under reference, he said a lot of small and average airlines around the world have either collapsed or gone bankrupt, while most, if not all the world’s major airlines have recorded losses or sharp falls in profit.
According to him, human and cargo traffics at many airports, not just in Nigeria, but also around the world had also dwindled with the declining purchasing power of passengers and shippers.
He added that major carriers are diverting into low-cost operations in order to meet up with the current challenges in the sector, stressing that they now resort to use of smaller and more fuel-efficient aircraft.
Usman disclosed that the big challenge at the moment for Nigeria and many other countries was creating a friendlier and more enabling environment for airlines and indeed other economic activities to flourish and hence ensure a sustainable air transport industry.
He, however, opined that national political leadership should ensure that square pegs are put in square holes, giving the regulatory body the necessary autonomy by resisting unnecessary interference in the latter’s statutory operations.
Besides, he said that government’s interference in the sector should also be limited to ensuring an enabling political and economic environment to engender economic viability and sustainability of the aviation industry.
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