Forex Scarcity Cripples Local Airlines, Spike Airfares
The foreign exchange (FX) liquidity crisis is eating deeper into the daily operations of the local airlines, causing airlines’ capacity to dwindle and hitting up airfares.
The Economic Confidential, yesterday, learned that operators in the aviation sector have not received FX requests from the Central Bank since February, which explains why multiple airplanes are stuck in maintenance facilities overseas, and a lot more unserviceable and on the ground at airports.
The chairman of United Nigeria Airlines, Obiora Okonkwo, who confirmed the dire straits, said local carriers might have to consider interlining or a codeshare arrangement to cut down the cost of operation and enhance survival chances.
But the effect is telling on air travellers, who have to pay more airfares for less than an hour travel time. Fact check yesterday showed that future flights still range between N35, 000 and N55, 000, on one-way Economy Class, and an average of N90, 000 for return tickets on most of the airlines.
However, most sticky for travellers are today’s flights, currently billed by some airlines, over-the-counter, for between N100, 000 and N130, 000 for one-way Economy Class.
konkwo, told reporters in Lagos yesterday that the forex scarcity remains the major challenge facing all operators, given that the sector requires dollars for all aspects of its operations.
Regrettably, “CBN has not given dollars to airlines since February 2021 owing to the scarcity of foreign currency. Aircraft business is very capital intensive. The solution to the survival of airlines is access to spare parts. Aircraft spare parts are not sold here in Nigeria, they are sold overseas. The aviation industry should be given all the necessary support to ensure the survival of airlines”.
Similarly, the rise in the cost of aviation fuel, from N160 per liter to N260 per litre, in the last few weeks was also fingered for over 50 per cent rise in the cost of airfares.
Okonkwo said that airlines would in most cases resort to increasing fares through adjustment in the ticket price as a result of the high cost of the commodity.
The price of the commodity is said to be more expensive in other airports aside from Lagos, Abuja and Enugu airport. Most airports have just one aviation fuel marketer; thereby leading to the monopoly of the supply of the commodity to airlines, who queue to get their supplies in many of the airports.
The airline chief, however, stated that he would want to believe that the operators would not be unreasonable with the fixing of ticket prices.
Okonkwo said the airline might be condemned to interline and codeshare to scale the hurdle, adding that his airline was willing and ready to have such a relationship with any willing airline.
He disclosed that his airline had signed a Memorandum of Understanding (MoU) with some airlines in the country.
This is just as the airline is in the process of acquiring land space from the Federal Airports Authority of Nigeria (FAAN) in a bid to set up its Maintenance Repair Overhaul (MRO) facility aimed at serving the airline and others both domestically and in the sub-region.
He said the new airline that commenced operations eight weeks ago had airlifted 25,000 passengers already with an average of 3,200 passengers weekly.
Director of Administration of the airline, Linus Awute, said the airline was trying to grow steadily, and monitoring the trend to inject more capacity as necessary.
Financial Secretary of the National Association of Nigerian Travel Agencies (NANTA), Daisi Olotu, also confirmed the FX challenge, saying that local authorities, especially, the Central Bank of Nigeria (CBN), could do much more to support the industry to survive the difficult period and begin the recovery phase.
Olotu said NANTA members’ mandatory annual dues to IATA had been remitted to the bank, saddled with converting the same to dollars for onward remittance to IATA.
“But the CBN has not been able to grant our members just $60,000. In place, they are offering $4000. What are we to do with that? IATA has been magnanimous and showed understanding, but it is not just fair on our survival plan,” Olotu said.