High airfares and overcrowded airports
The sudden spike in local airfares at this time of economic recession and this Christmas season is bad enough for hapless Nigerian air passengers; the addition of chaos (over-booking, flight delays) that has recently been accompanying air travels at the major airports is most disappointing, and portrays lack of empathy to people’s welfare. At a time of pandemic when countries are subsidising the cost of living to ease burden on citizens, Nigerian system is pushing the cost of an embattled aviation sector to average consumers. Regulatory agencies should discharge their statutory duties to avert exploitation and suffering of consumers even while ensuring the survival of operators.
In the past week, airfares have gone over the rooftop. On the average, all routes, subject to availability, now sell for between N55, 000 and N75, 000 Economy Class one-way tickets. Return tickets for the same class average N120, 000. The one-way Business Class of N58, 000 was sold for an average of N100, 000 where available. For instance, a Lagos-Kano Economy flight ticket that formally sold for about N35, 000 recently went for N55, 000. Days after, the same ticket sold for N95, 000. Some passengers recently bought Lagos-Abuja flight tickets for N100, 000 per seat!
In an attempt to justify the increase, airline operators attributed it to forces of demand and supply. In reality, airlines are witnessing a traffic surge typical of the season and one of the highest they have seen in the post lockdown era. However, this is more than their depleted fleet capacity can handle. Cashing in on desperate air travellers, the airlines are targeting the highest bidder to maximise gain.
In fairness to the airline operators, their business is among the worst-hit by COVID-19 pandemic. For about four months, planes were grounded; airlines not generating revenue and incurring huge losses. Industry estimate has it that the local sector lost between N360 billion and N500 billion to the pandemic.
Flight resumption did not end the airlines’ misery. It began with poor load factor, more aircraft requiring maintenance amid cash burnout. Worst scenario was the fluctuation in the naira-to-dollar exchange rate. In the last two weeks, Naira has taken a further dip reaching N500/1$ on the black market rate, which has been offering respite to operators in the absence of official intervention. The bizarre implication for aviation that does everything in dollars, except sales, is the high cost of operations. A C-check, which is required every 18 months, now costs an average of $2 million (N1 billion) per commercial aircraft. In the absence of liquidity for repatriation, aircraft on C-checks are stuck overseas and those yet to leave are grounded.
The hard times are not peculiar to the local aviation industry. What is odd is the reluctance of the Federal Government to support the local airlines with financial packages, as in other parts of the world. The International Air Transport Association (IATA), a clearing house for 280 airlines globally, projected that no airline will survive without a measure of government support, in the form of financial stimulus, tax and charges waivers, to bring down the cost of operation and avert passing losses to consumers.
Since the onset of the COVID-19 pandemic, governments have helped airlines to survive, with approximately $173 billion in various forms of financial support. Airlines’ losses are now forecast to top $118 billion this year and nearly $39 billion in 2021. The global industry is expected to continue burning through cash at a rate of almost $7 billion per month in the first half of 2021.
Aviation Minister, Hadi Sirika, disclosed that the local airlines shall be entitled to only N4 billion COVID-19 bailout funds. That was contrary to the N27 billion earlier penciled for the entire aviation sector by the National Economic Council. Clearly, given months of inactivity due to lockdown, air planes on ground, maintenance requirements, unmet financial obligations, cash burnout and low patronage since flight resumption, the airlines would need massive financial intervention to rebound. Citing the global trend of governments’ financial support to airlines, the National Assembly has demanded for at least N50 billion worth of stimulus package for local airlines. Till date, the airlines have not received any lifeline.
It is unacceptable that the government and its aviation agencies seem to care less about giving succor where it is most needed, thus abandoning local airlines to their fate. Talks about bailout had been on since May; but seven months later, the airlines have received no support. The autonomous Nigerian Civil Aviation Authority (NCAA), besides its safety oversight, is in a better position to know the financial status of each carrier and should be able to tell where they need interventions. Rendering such service is not for the airlines alone, but also to safeguard over 200,000 direct and indirect jobs that the industry offers, and services they provide for the economy to push through these desperate times. When other governments are giving palliatives, loan grants and tax holidays, to ease the pressure on citizenry, it is sad that government is not paying attention to basic drivers of the economy and commerce.
Notably, the high air fares, at a time of festivities will invariably force many Nigerians to travel by road and be exposed to diverse risks of marauding armed-robbers, kidnappers, bandits, herdsmen, and all sorts of kill-joy that are now part of travelling daily realities. This could be minimised if not totally avoided had many Nigerians fair access to air travel. Besides, an economy in recession needs to encourage mobility. Air travel connects Nigeria to the world at large and shares prosperity.
The Federal Government should pay urgent attention to the air sector. Besides the bailout fund, there should be other considerations like tax holidays, waivers, reduction in charges and special FX windows at the Central Bank of Nigeria (CBN) to enable airlines repatriate stranded aircraft, and stimulate the market for growth. Notwithstanding that airfares have been liberalised, it is expedient that the NCAA should sit down with the operators and work out an agreeable fare range in the interest of the average Nigerian and investors. Deregulation of aviation sector should not be a leeway to arbitrariness and obnoxious exploitation that inflict more hardship on Nigerians than they are already going through. Government should not leave the industry to providence.