The Nigerian aviation industry is critically ill. The operators are in advanced stage of financial asphyxiation. The regulators are ill-equipped to police the industry.
The level of disorderliness is so deep that even as it is generally agreed that the airlines lack adequate number of seats in their fleet to give air travelers the efficient service they deserve, the operators still complain about low passenger turnout as one of the reasons for their financial predicament.
The depreciation of the naira in the last six months has worsened an already bad financial situation. Nigeria lacks the facilities to carry out major checks in the aircraft in the fleet of domestic airlines.
With the naira now exchanging in the parallel market at N210 to the dollar, the airlines are practically working for foreign firms that operate maintenance facilities.
The federal government’s declaration of free tariff for aircraft spare parts has done little to assuage the financial burden of aircraft maintenance. The expensive checks are done abroad and paid in dollars. Airlines’ services are paid for in badly battered naira.
High cost of aviation fuel is a thorn in the flesh of domestic carriers. Nigeria has one of the highest cost of aviation fuel in the world. It hovers around N170 per litre in major airports. However, in some remote airports, one can pay as high as N200 per litre.
Airline operators in other parts of the globe heaved sighs of relief when the price of crude oil started a precipitous journey down the cliff in the middle of 2014. As the price of crude oil dropped below $60 per barrel, the pump price of aviation fuel tumbled so precariously in Europe, North America and Asia that airlines had no option than to pass the dividend of price crash to air travelers by way of lower fares.
The reverse was the case in Nigeria.
Crude oil price and the pump price of aviation fuel have defied all economic logic and continued to move in opposite directions. The pump price of aviation fuel headed up as the price of crude oil was crashing. In some busy airports, airline operators could obtain aviation fuel at N160 per litre when crude oil was selling at $110 per barrel.
The cost of the product jumped to N200 in some remote airports as crude oil price glided below $60 per barrel. Airlines responded to the strange economic phenomenon by hiking the fares. The Nigerian factor, a euphemism for corruption and inefficiency are to blame for the high cost of aviation fuel.
The pump prices of aviation fuel and diesel are deregulated, while the federal government controls the pump price of petrol and kerosene. Data from the price template on the website of the Petroleum Products Price Regulatory Agency (PPPRA) suggest that the open market price of a litre of aviation fuel should not be more than N115.
The federal government has been watching the cruel exploitation of consumers of diesel and aviation fuel with irritable helplessness. The woes that betide Nigerian airlines is multifaceted. Though the high cost of aviation fuel has escalated the cost of operations, the airlines followed the line of least resistance out of that problem. They passed the high cost of fuel to passengers. Ironically the airlines have no solution to the invasion of domestic routes by foreign airlines.
Nigeria’s open skies policy is the most difficult problem of domestic carriers. The open skies policy is a global phenomenon. However, Nigerian skies are too open. It hugs foreign airlines and kicks out domestic carriers. Last year, foreign airlines raked in N231 billion from ticket sales on Nigerian routes. Domestic carriers toiled to eke out N73 billion. Some of the foreign airlines fly to practically all the busy airports in Nigeria.
Emirates Airlines flies to Lagos, Abuja, Port Harcourt and Kano airports. Ethiopian Airlines does the same thing, except that it has gone one step further by flying to Enugu.
Nigeria has opened its skies too wide for rich foreign airlines to wreck havoc on cash-strapped domestic carriers toiling to stay afloat in the face of atrociously high cost of doing business.
The open skies policy is supposed to be a reciprocal gesture, but Nigerian airlines are not benefitting from it. Some foreign countries have used bureaucratic bottlenecks to block any daring Nigerian airline from accessing their open skies policy.
Besides, the foreign airlines invading lucrative routes in Nigeria at the expense of the survival of domestic carriers are not adding any economic value to Nigeria. They hardly create jobs in Nigeria. The few Nigerians in their local offices are mostly casual workers collecting pittance and intolerable insults from their foreign bosses.
At least 99 per cent of the passengers that Emirate Airlines lifts in its twice daily flights, are Nigerians. The airline worsens its merciless exploitation by under-paying the few Nigerians in its pay roll. If the federal government cannot shield the cash-strapped domestic airlines from the merciless grip of its open skies policy, it should compel the foreign airlines to add value to the economy by running their offices only with well paid Nigerian staff. We cannot continue to lose from both ends.