At N1,200/$, N985/liter fuel spike squeezes air travel, pricing

• Domestic carriers’ N100,000 per one-way trip may increase to N130,000
• Confusion downstream as IATA Rate of Exchange surges by N139 in 24 hours
• Foreign airlines bemoan $793m trapped funds, $300m legacy debt, illiquidity on I&E window
• Aviation will not survive without a clear line of FX support for operators, IATA warns

Steady free-fall of the naira value to the dollar has registered new odd records in the air transport sector, with aviation fuel now almost N1000/liter and operators cum travel agencies in a pricing dilemma.

Across both local and international segments of the sector, the rate of N1200/$1 in the open market and an almost 400 percent surge in the price of aviation fuel are threatening to double already high airfares – and further shrink the air travel market.

On the domestic front, findings showed that the average fare of N75,000 for a one-hour (one-way) flight has increased to N100,000, and may peak towards N130,000-plus soon, to cover the cost of operations only.

Foreign airlines operating on Nigerian routes have also adjusted their airfares much to the confusion of travel agencies. At the weekend, the IATA Rate of Exchange (IRoE) soared by N139, shifting from N842 to N981/$1 in one leap.

While the International Air Transport Association (IATA) reiterated not increasing airfares, it however, bemoaned the complicated foreign exchange liquidity crisis that has kept foreign airlines’ $793 million trapped in Nigeria (as of August 2023 entry). Of the sum, $300 million is legacy debt which the Central Bank of Nigeria (CBN) has taken but yet to remit to IATA on behalf of the airlines.

IATA told The Guardian that while the FX liquidity crisis is not peculiar to the air transport sector, the Federal Government has no alternative than to avail a clear line of FX support to urgently save local airlines, and in turn, the economy from the slippery slope.

Aviation fuel, also known as Jet A1, accounts for between 30 to 40 percent of operational costs in aviation. Being a deregulated product that is exclusively controlled by suppliers, the price has consistently been fluctuating along with the naira to dollar exchange rate.

Findings at the weekend showed that aviation fuel has increased from N800 to almost N1000/liter, subject to location.

Checks showed that Lagos Airport has the lowest rate of N935/liter. The average pump price at Abuja airport was pegged at N975/liter. Port Harcourt sold for N970, while Kano was N985. Upper North sold for an average of N1000, subject to availability.

Apparently, in sync with the dire realities, airlines like Air Peace, United Nigeria, ValueJet, and Arik Air have already aligned average pricing from N75,000 to N100,000-plus benchmark – “a paltry increment compared with the massive surge in the price of fuel and other components”, an operator said.

Read More here: The Guardian NG

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