NEWS: NIGERIA - Domestic airlines at risk as naira drops to all-time low

With the naira hitting an all-time low of N280 to a United States dollar in the autono­mous market at the weekend domestic airlines are now in real danger and may die un­timely if palliative measures are not provided by government. Aside the drop in the value of the naira, the airlines are also hit by the prevailing forex scarcity as the Central Bank continued to ration foreign currencies in its bid to strengthen the naira.


The situation is further worsened by local operators lack of maintenance facilities in the country. They also have to contend with reluctant foreign aircraft lessors who, following recent air mishaps, classified the country among “high-risk nations” for doing business. The development has also attracted very high insurance premium.

Major aircraft leasing firms such as GE Capital Aviation Services (GECAS), International Lease Finance Corporation (ILFC), Cab Tree and Aercap have since raised the lease on aircraft to Nigerian airlines by over 40 per cent.

Consequently, analysts say domestic airlines are faced with a plethora of problems ranging from costly overseas maintenance of airplanes; expensive spare parts sourced abroad to mandatory recurrent overseas training of their pilots and crew and other foreign currently related expenses.

The mandatory C-Check that is performed approximately every 20–24 months or a specific amount of actual flight hours (FH) or as defined by the manufacturer costs millions of naira. This maintenance check is much more extensive than a B check, requiring a large majority of the aircraft’s components to be inspected. The check puts the aircraft out of service and until it is completed, as it must not leave the maintenance site. It also requires more space than A and B checks and is usually carried out in a hangar at a maintenance base. The time needed to complete such a check is generally 1–2 weeks and the effort involved can require up to 6,000 man-hours. The schedule of occurrence has many factors and components as has been described, and thus varies by aircraft category and type.

Aside the aforementioned, there is also the challenge of poor access to long-term loans as commercial banks in the country have penchant for quick returns on investment and not airlines that require huge capital outlay and a long repayment period.

Aviation experts insist that with air tickets sold in naira at an average of N18,000 for a one-hour flight, the airlines will find it hard to effectively fuel their aircraft, let alone make profits to pay their staff, pay government charges and taxes and carry out mainte­nance.

The Managing Director of Medview Airlines Munir Bankole in a recent telephone interview with Daily Sun lamented the high interest rate involved in financing aircraft purchase.

“We borrowed money when the dollar was much lower to buy some of our airplanes but now we have to source more money to finance the same airplanes because dollars have gone up and naira has fallen. Where will the money for the differential come from? It’s really not easy running airline business. We are into it because of the passion we have for the industry. We also want to offer Nigerians the best we can afford within the circumstance we find ourselves”, he explained.

According to the Chief Operating Officer of Dana Airlines, Mr. Obi Mbanuzuo, the fall of the Naira has brought untold hardship to airlines in the country, noting that the cost of aircraft maintenance could double coupled with insurance premium which could also become much higher than it is now.
“The prevailing situation is putting a lot of pressure on the airlines. We can’t cope with the diminishing value of the Naira. You convert so much naira and the dollars you’ll get will be small. So, you now need more naira to carry out your normal operations and ticket price is still the same. Maintenance is there to look at; salaries would have to be paid. We just have to cope. Things will turn around very soon with this government”, he hoped.

Investigations by Daily Sun show that local airlines, in their bid to survive, may hike air fares to enable them meet up their soaring expenses.

But experts say doing so may lead to market resistance, where many travellers completely boycott domestic air travel because of their likely inability to afford any increase in air fare.

Some customers who spoke with Daily Sun say they consider the current flight costs for one hour service astronomical.

“Lagos-Abuja is at times N18,000 if you book and pay online. When you buy just before you board, it jumps to as high as N35,000 during peak periods. So by the time the airlines increase their fares, I cannot afford it. I’m a trader. I go to the north to buy my goods. I can as well go by road because I can’t afford to make my goods too expensive, how can customers afford it? Some are owed salaries, some have lost their jobs and we all know the harsh economy of today. Increase airfare and watch airlines lose passengers. It’s only politicians and top government officials will afford the increase”, Okehi Oba, a trader told Daily Sun.

Another regular flier, Barrister Chris Agu who doubles an importer sympathized with the local operators, urging the government to assist. He however warned that further increase in airfare will likely be resisted by passengers due to the harsh economic situa­tion in the country.

“The airlines in Nigeria are passing through hell. I feel for them. All their operations are in dollars, pounds and euros. Only fuel is in naira. Now Nigeria is falling meaning they have to spend more to do these foreign transactions. But can Nigerians afford further increase in air fare? The answer is no. the government can help them in loans, crashing fuel price and making sure there an standard maintenance base in Nigeria. We should be able to do a C-check here in Nigeria”, he said. Interestingly, while Nigerian travelers lament high airfares, other nations see theirs as too high compared to Nigeria.

International airline analysts say the ridiculously low fares in Nigeria has led to the demise of many local carriers.


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