By Chinelo Obogo [email protected]
For many months running, scarcity of forex, devaluation of the naira and high cost of aviation fuel plunged Nigeria’s aviation sector into severe financial crisis. Domestic airlines were forced to source forex for their operations from the parallel market and for international operators, they had to survive by blocking their low inventory, thereby causing an astronomical increase in cost of air fare.
Tickets that used to sell for between N500, 000 and N600, 000 are now sold at double the price and to worsen an already bad situation, the Central Bank of Nigeria (CBN) couldn’t provide forex for the foreign airlines to repatriate the accumulated funds from sale of flight tickets.
After some international airlines threatened to suspend their operations until the trapped funds were released, the CBN made $265 million available. But the cache was that 50 percent of that sum would be paid immediately, while the other 50 percent would be paid at the end of October.
The President of the National Association of Nigerian Travel Agencies (NANTA), Susan Akporiaye, told Daily Sun that despite CBN’s intervention, most of the US and European airlines have not opened their lower inventory, causing the cost of flight tickets to increase further.
She however revealed that unlike their European counterparts, African airlines have left their lower inventories open, making most Nigerians who used to prefer traveling with European operators, now opt for African airlines. This development has caused increase in passenger load factor and may also have contributed to the improvement of African airlines as seen in the September performance report released by the African Airlines Association (AFRAA).
African airlines’ performance
The September performance for African airlines which was released on October 12, 2022 by AFRAA, the trade association of airlines from the member states of the African Union (AU), shows that traffic and airlines capacity deployed reached 82.52% and 82.1% of the 2019 levels respectively.
AFRAA said African airlines have now resumed operations to 99.2% of routes operated before the pandemic, while eight African airlines have exceeded the number of international routes they operated before COVID.
The report shows that domestic market share is now at 39.5% capacity and 32.8%% of passengers were carried while intra-Africa passengers carried represented 29.5% and corresponding capacity at 24%. Intercontinental traffic for September was 37.6% and capacity, 36.5%.
AFRAA estimates revenue loss for 2022 to be $3.5 billion, equivalent to 20% of 2019 full year revenues and the projected revenue loss due to COVID for the third quarter of 2022 is approximately $800 million. In Africa, the number of new COVID-19 contaminations remains low. The total case count has reached 619 million and 12.6 million worldwide and in Africa respectively. The global recovery rate is 98.9%. Only 22.3% of Africans have received at least one vaccine compared to the global average of 67.9%.
Jet fuel price continues the upward trend. Year to date, global average price per barrel is $142. Impact on global airlines fuel bill is estimated at $131.6 billion for the full year.
Nigerians opt for African airlines
Giving more insight on the finaicial crisis in the aviation sector and why Nigerians are now opting for African airlines, Akporiaye said: “There have not been any improvement in the past few months, maybe the foreign airlines are waiting for the end of October when the government promised them that the balance of that 50 percent will be paid. The airlines got half of the $265 million that was released by CBN and the other half was supposed to be paid at the end of October. So nothing has changed at all. The prices of international flights are still at that very exorbitant and ridiculous rate. We have had conversations with the airlines but they are not budging. From that time till now, the exchange rate has increased to.
“There is a global crisis generally and we were still trying to recover from the pandemic, then the Russia-Ukraine war started. The world is a global village and what affects one person affects the others. The war brought more difficulty globally but the economic crisis in Nigeria is peculiar because we are a mono economy and a consumer nation. We are not making much money in foreign exchange like we used to do, so, we do not have forex. It is not that the Nigerian government does not want to give it, the problem is that it is not there.
“The government didn’t just single out airlines and refused to give them forex, the truth is that there is no forex available. Do you know that travel allowance that used to be $4,000 has now been reduced to $2,000? NANTA has a stand at the World Travel Market (WTM) and because I am travelling. I applied for travel funds and the portal was still showing $4,000 but by the time they sent my approval, they said I was only entitled to $2,000. That shows you how bad things are and to make matters worse, it takes about one month to even get the $2000. This is to tell you that things are really bad.
“We are in a serious crisis but we thank God for African airlines that refused to join their European counterparts in jacking up cost of flight tickets. African airlines are still selling all their classes of tickets unlike European operators. Those are the ones that people are really depending on. Even my members who are going for the WTM are using African airlines like RwandAir, Egypt Air, Ethiopian and Middle East airlines like Qatar. These airlines still sell flight tickets from as low as N450, 000 upwards if you pay on time. I booked tickets for Manchester and London for some people last week for N450, 000. I even booked for someone that is travelling on October 17 to London for N498, 000. It is not that the forex and fuel crisis doesn’t affect the African airlines, I just want to believe that they are being patriotic with Nigeria because we are all Africans and they want us to support each other.”
Bilateral Air Services Agreement (BASA)
Last month, NANTA said the exploitative fares charged by international airlines are only charged to Nigerian travelers as no other African country has experienced this despite the fact that they owe foreign airlines.
The association said the Central Bank of Nigeria defrayed $265 million out of the $465 million owed foreign airlines but that the accumulation of more debts is expected to hit $1 billion if nothing was urgently done. It also warned that over three million jobs are at stake following the cut in travel by carriers and some of the airlines that have continued to threaten to leave Nigeria.
At the time, she absolved the airlines of complicity, admitting that Nigeria violated all known Bilateral Air Services Agreement (BASA) which allows foreign carriers to quickly repatriate their funds out of the country as quickly as possible, stressing that the country does not have the moral right to blame the carriers for some of their actions.
Until September, Emirates airline and few other operators threatened to pull out of Nigeria. The carriers were apprehensive as many of the airlines had already begun reducing the number of their Nigerian engaged workers which they noted would have a spiral effect on businesses. NANTA also said that they are shutting down some of their offices because many Nigerians cannot travel due to the high fares.
Akporiaye said the airlines withdrew lower inventories across board, selling at the highest possible openings as a way to cushion their funds being trapped and that despite paying the carriers 50 percent of their funds, she chided the operators for visiting the Nigerian travelling public with most exploitative response in the name of protecting their business.
“As usual with them, their response which we could describe as ‘High Fare pandemic’, is solely targeted at Nigeria and Nigerians, and cannot be seen where in Africa even in countries where they also have their funds being trapped in Nigeria.
“Nigerians have to buy tickets to the tune of three to four million naira be charged as high as one million naira to change travel dates even on tickets before this trouble began.
“We appreciate the response to the release of some funds, urge Government as a matter of urgency to open further windows of engagement and calling for a meeting with all parties involved; to include CBN, Minister of Aviation, Minister of Finance, Foreign Airlines, NCAA, IATA,” she said.