By Chinelo Obogo [email protected] 07064781119
In the past three months, the cost of flight tickets to most of the routes across the country doubled, causing air travelers to groan at what many described as outrageous. A ticket for one economy seat to Abuja which used to cost between 25,000 and 30,000 depending on when the flight was booked, was sold as high as 70,000 and in some cases N80, 000.
Airline operators say that unless the Central Bank of Nigeria (CBN) provides easy access to forex or creates special window for operators, fares would continue to soar. A source within one of the older airlines told Daily Sun that because domestic operators are finding it difficult to source dollars from the CBN, they have resorted to buying it from Bureaux de Change (BDC) operators at N500 and more and this has caused astronomical rise in the cost of operations.
The operator also pointed out that many aircraft that were taken out of the country overseas were yet to be brought back because of Coronavirus pandemic, which has hindered activities in most countries, so the Nigerian carriers have limited fleet but high demand for air travel, as insecurity continues to discourage many people from travelling by road.
Chief Operating Officer of Air Peace, Mrs. Toyin Olajide, said airlines need dollars for most of their operational expenses and to do that, most of them had to resort to buying dollars from the parallel market in order to source spare parts. She explained that if airlines charge according to how much they spend sourcing forex, air fares could be much higher to reflect the actual cost of operations but that competition has kept the cost of ticket at the current pricing.
She also admitted that there is limited capacity because airlines are operating less number of aircraft in their fleet, disclosing that Air Peace has most of its aircraft overseas where they were ferried for maintenance but they got stuck because of COVID-19 pandemic lockdown. She, however, said that the airline’s brand new Embraer E195-E2 would soon start operation, as NCAA is about to complete its certification on them.
“Airfares are high because of forex. We buy dollars from the parallel market because we cannot source from the CBN. When you look at the prices of tickets, they don’t reflect the actual cost of operation; if they do they will be higher than what we sell tickets now, but competition has kept the fares relatively low. We need dollars for most of the things we do in aviation. We buy spares in dollars and we source dollar at N500 per dollar. Just imagine the cost if you want to import aircraft engine. So the high cost of fares is because of forex.
“We already have two of the aircraft in Nigeria and three are due to arrive this May. NCAA is at the stage of demonstration flight, which will take about one week. So we will have five of the new aircraft operating from this month. But for the other aircraft what is affecting us is the maintenance calendar and the fact that those aircraft taken for maintenance are yet to return,” Olajide said.
Daily Sun had earlier reported that the Chief Executive Officer of United Nigeria Airline, Obiora Okonkwo, said scarcity of forex is a big issue for operators and urged the CBN to grant airlines a special window to access it.
“Forex is a big problem for operators because by the rules and regulations, CBN makes the official bidding market for dollars bi-weekly, which means that if you approach your bank and they bid for you this week, if they don’t get it, you have to wait for the next two weeks. If you rely on that to make things happen, you will find it difficult. I am advocating that a special window be opened for airlines so that we can access forex. Similar businesses overseas have been hugely supported by their countries with different policies. This is a service based industry and a little support from the government would help operators. Air travel helps the economy and it helps security and should not be left alone in the hand of operators,” Obiora said.
Green Africa slashes airfare
Despite the projections of experts that airfare would continue to soar because of forex issues, Green Africa, a low budget airline and the latest entrant into the aviation market has caused a disruption in air ticket pricing. The start-up airline will use three new ATR72-600S jetliners leased from ACIA Leasing to service its domestic networks with two already delivered and the other to be delivered in the coming weeks. Both aircraft seat 70 passengers in an all-economy, 2-2 layout. The carrier will slowly scale up operations as it receives more aircraft in the coming months and over the year.
The airline does not plan on being a regional carrier, rather, it is gearing up to take Airbus A220s in the future. It has ordered 50 A220-300s, the largest Airbus order by any African airline but it is yet to firm up its order. For the meantime, passengers expect to see the ATRs being the only aircraft in the fleet. Babawande Afolabi, Founder and Chief Executive Officer, said: “We are building a value carrier that will connect customers to their opportunities and be a catalyst for positive change across the region.”
Green Africa’s focus is on six domestic destinations; Abuja, Akure, Port Harcourt, Ilorin, Enugu and Owerri. It commenced flight tickets sales with offerings as low as N16,500 following the pre-sales approval of the Nigerian Civil Aviation Authority (NCAA) from Lagos to Port Harcourt starting from June 24, 2021, while other airlines charged as high as N65,000 just last month. Flights to and fro Owerri on Air Peace, United Nigeria were high as N100, 00 in April. Overland charged as high as N60, 000 to Ilorin in April as well.
For instance, in April, if a passenger were to book a flight from Lagos to Abuja one or two days ahead on Air Peace, the passenger will pay not less than N50, 000 for a one-way ticket. But a ticket booked on May 27 for May 28 and May 29 now cost N38, 800 and N35, 700 respectively. The airline also slashed the airfare from Lagos to Ilorin (flight operations to Ilorin are slated to commence in June 2021) from N52, 500, last month, to N32, 700.
In an era of scarcity of forex, COVID-19 pandemic and an increasingly difficult business environment, how sustainable is this business model? Captain John Ojikutu told Daily Sun that the airline may find it difficult to sustain such low rates when faced with the harsh economic realities in the sector. “For how long can the airline sustain that price if it must comply with the safety and economic regulations. The price of N16,000 is about $34 instead of an economic price of $100 comparable to market price now and 20 years ago of N4,000 when dollar was N40/$. Time will tell. Someone told me it was an end time for those in capital flight business,” Ojikutu said.
Besides using ATR planes, other cost cutting avenues is employing very small number of staff. While bigger airlines like Air Peace employs over 3,000 staff, a source in Green Africa told Nairametrics.com that Green Africa won’t employ more than 15 staff across the country. “We are only employing less than 20 direct staff but will get more contract staff to do more work. Most of the other jobs will be outsourced. The era of employing scores of staff and paying them fortunes for the same jobs agents and temporary workers can do is gone. To survive during difficult times, we must implement certain measures,” the source revealed.
ATR is the world-leading manufacturer of Turboprop aircraft. Some describe the ATR as the Landrover of short haul flights. The company manufactures two sizes of turboprop aircraft, the 70-seat ATR 72 and the 50-seat ATR 42. Both aircraft benefit from fuel, emissions and cost efficiencies provided by turboprop engines. While jets may be the faster aircraft type, on routes of 560 kilometres/350 miles or less, the scheduled flying time longer via turboprop. Customers have traditionally preferred the jet to the turboprop: the jet is seen as the quieter, more comfortable and spacious aircraft in comparison. Where a flight from Lagos to Abuja with a Boeing or an Embraer will not take up to an hour, the website of Green Africa put the flight time for the same trip at one hour, 30 minutes.
However, the new breed of turboprops have the space and flexibility to add first, business and premium-economy style seats. The advances in engine technology, noise levels on-board are far below previous levels, and new cabin designs provide expanded baggage space and ergonomic seats for passengers.