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Fuel hike, flight rationing… and passengers groan

By Wole Oyebade
24 June 2016   |   1:27 am
Air travellers across the country are currently not having the best of times with one-too-many cases of delayed flights and outright cancellations in some instances.
Murtala Muhammed Airport, Lagos

Murtala Muhammed Airport, Lagos

Air travellers across the country are currently not having the best of times with one-too-many cases of delayed flights and outright cancellations in some instances.

In the last one week, at least three in every five flights had delayed scheduled flights for two to three hours, with operators citing “operational reasons”.

The development was evident in all major airports nationwide, including Lagos, where only passengers heading to routes like Abuja, Kano, Lagos and Port Harcourt can be sure of not more than an hour delay.

Travelling on other less viable routes is not so pleasant. A Lagos-Benin passenger, Henry, was on Wednesday delayed for over three hours at the General Aviation Terminal (GAT) of the Murtala Muhammed Airport in Lagos.

According to Henry, the flight was scheduled for 2:15pm, but due to “operational reason”, it was initially delayed for an hour. “Two hours later, we were still waiting. If I had taken to the road when I left home for the airport, I would have been in Benin City by now. But I’m still in the airport waiting and not even sure the flight will not be canceled.”

The flight was not cancelled as Henry and other passengers were set for boarding at 5:30pm.Many passengers in some parts of the country were not as lucky, as their flights were cancelled for reasons not unconnected with low capacity.

It would be recalled that one of the two Nigerian flag carriers abruptly cancelled a Lagos-London flights recently after several hours of delay. The operator cited “operational reasons” as frustrated passengers went livid creating a scene at the Murtala Muhammed International Airport (MMIA).

Inside sources told The Guardian on condition of anonymity that the harsh economic condition had pushed operators’ back against the wall with very little else to do but to ration available flights and concentrate services on high-traffic routes.

The top executive said: “I can tell you for a fact that several planes are already due for routine checks but operators cannot afford forex to fly them overseas for maintenance. Imagine the cost of servicing one aircraft, multiplied by about N285 to one dollar currently offered in the market. How many operators can afford that on three or four planes?

“It means those planes will be grounded for the time being. Some airlines have already booked new planes to boost their operations, but the forex rate is not encouraging anyone to warrant such venture. The same also applies to needed spare parts.

“This is one industry that is entirely dependent on foreign exchange and it is really worst-hit by the current situation. We have nothing to gain delaying flights or cancelling anyone. We are losing money for every minute delay. But where there are flights, or inadequate passengers for a particular route, what do we do?” he said.

While the exchange rates have not helped the course of importing spare parts and purchase of new planes, the new forex policy has further raised the price of aviation fuel in the course of the week.

Jet A1 fuel that had in the last few weeks fluctuated between N114 and N116 suddenly rose to between N160 and N170 per litre, depending on the marketer of choice.

While the product sells for about N150 per litre in Lagos, the cost ranges between N160 and N170 in Abuja and Kano.A marketer, Olasimbo Betiku, yesterday said that the so-called hike was due to initial reaction to the flexible forex regime.

Betiku, who is the Chief Operating Officer of CITA Petroleum Limited, explained that the Jet A1 market is entirely different from other petroleum products that are under strict pricing regulation.

Jet A1, he said, is a function of business-to-business market and dependent on arrangements an operator has with a marketer.According to him, “some relationships may be 12 years old, some may be 12 months, and others may be six month or even one months. In some cases, it may be on the spot pricing relationship.

“The hike that was observed is absolutely due to dynamics of the market. It is a function of retooling the forex system. The way it affects the marketers are also different – either as a shock or as an opportunity.

“Marketers that were purchasing forex at N199 to one dollar will receive the development with shock, while those that have been buying at the parallel market of N370 will receive the new rate as an opportunity. That is why marketers will not have a uniform price. But like I said, the current hike is due to the initial reaction to the new system. It will normalise soon,” Betiku said.

Meanwhile, mixed reactions have trailed the forex policy, with foreign airlines commending the move, while local operators expressed concerns. Foreign airlines that have in the last one year groaned over difficulties in repatriating stuck funds, commended the development, which would make the scarce forex available now.

Hints from the airlines’ offices showed that with the open doors to repatriate about $600 million, the operators would reduce fare tickets and attract more patronage from the citizenry.

On the flip side, however, local operators have complained on the “unhealthy development” that the new regime would bring to the sector that is entirely dependent on foreign exchange.

Former Managing Director of Nigerian Airspace Management Agency (NAMA), Captain Roland Iyayi, said that the hike in naira to dollar exchange rate would not mean well for any operator.

According to Iyayi, it is a double edge sword, as it counld make forex available, but might also attract hike in ticket fares to the detriment of the industry.“Yes, the easiest solution is to increase fares. But when you do, it reduces patronage.

You can increase your fares with the hope that you can make up for the increase in exchange rate, but when you do, you reduce patronage; it is a demand and supply issue.”

Iyayi, who is the chief executive officer of Topbrass Aviation company, added that the foreign airlines too would be affected, since they would have to repatriate funds at the rates applicable, which means taking out lesser funds than they should have.

President, Aviation Round Table (ART), Gbenga Olowo, reckoned that money supply and demand mechanism were the basic ideal method to exchange rate fixation, provided the intrinsic element of corruption on government supply side is adequately prevented.

Olowo said: “The foreign airlines though will have some relief in the immediate future, it is not without a loss on the accumulated funds of the past which will be repatriated at a rate higher than that of their ticket sales.“It is hoped, however, that rate of ticket sales will also float with the flexible exchange rate.

“To the Nigerian operators, increased access to funds should stimulate growth quickly and will love to see the like of Peace Air (designated to Atlanta) commence operations immediately to fill the vacuum created by United Airlines. Others should also grow fleet and increase route by flying to the many routes to where they have been designated.

“The Nigerian Airline has no place to go, hence the persistent Advocacy for strong Nigerian Flag carriers given better operational environment. Strong Aviation sector is undoubtedly a great stimuli to economic growth,” Olowo said.