"Airfares Will Increase”: Nigerian Airlines Risk Shutting Down Amid Forex Fluctuation

"Airfares Will Increase”: Nigerian Airlines Risk Shutting Down Amid Forex Fluctuation

  • Based on recent indications, domestic airlines may resort to shutting down over forex instability hindering proper plan
  • This is as the fluctuating exchange rates continue to impact the price of aircraft spare parts
  • Experts said this will lead to a drop in the domestic market's fleet size to as low as 35 to 50%.

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

There are indications that some domestic airline carriers may have to close because they cannot obtain the foreign exchange needed to either return or transport their aircraft abroad for maintenance.

Nigerian Airlines risk shutdown amid forex fluctuation
Fluctuating exchange rates have been discovered to impact the price of aircraft spare parts. Photo Credit: FG Trade
Source: Getty Images

The nation's twelve scheduled carriers, which operate various aircraft, including Dash 8 to MD 83, the Boeing 737 series, Airbus A320-300, A220-300, ATR, Embraer CRJ, Embraer E2, and Embraer ERJ-145, have seen significant fleet depletion.

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Additionally, Vanguard reported that fluctuating exchange rates have been discovered to impact the price of aircraft spare parts, resulting in operators having to modify ticket prices continuously.

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Lack of forex

Captain Roland Iyayi, the CEO of Top Brass Aviation Limited and a prominent member of Airline Operators of Nigeria, AON, lamented the lack of forex and demanded an immediate remedy.

He said:

“I know of a domestic carrier that has as many as 13 aircraft stuck at various maintenance facilities worldwide. The same operator, in the course of putting in bid for forex, has domiciled with the Central Bank of Nigeria, CBN, $14 million worth of naira. A year and half on, he is yet to receive the dollars.
“They have a situation where, because of this paucity or unavailability of forex, they are stuck with having about 30 per cent of their operational fleet stuck with maintenance facilities worldwide.

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‘’That has depleted their fleet availability and schedule reliability. So, when you hear a lot of domestic airlines cancelling and delaying, it is not completely unconnected with the fact that they have not had FX available to be able to recover their aeroplanes from optimising operations.

He opined that a state of emergency in aviation should be declared by the government.

Iyayi also claims that if the nation keeps going at this rate, within the next three months, the domestic market's fleet size might drop to as low as 35 to 50%, "meaning airfares will increase."

According to Captain Ado Sanusi, managing director of Aero Contractors, because no part of an aircraft is made in Nigeria, any fluctuations in the exchange rate have a direct impact on the cost of purchasing spare parts.

He said:

“That is what has translated to the number of aircraft we currently have in the country. The aircraft that are down for maintenance is a direct relationship to the exchange rate.

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“If the foreign exchange could be stable, the airlines will adjust their tickets to reflect the foreign exchange. The problem lies in the rollercoaster of foreign exchange. And that is where airlines experience challenges to remain in business.
‘’However, when there is long-term stability in the FX market, and the margin between the naira and dollar is not so wide, then one can plan.

NCAA gives instructions to airlines

Legit.ng reported that the Nigeria Civil Aviation Authority (NCAA) has threatened legal action against airline owners and operators that fly into nationally restricted regions.

The authority said it had received a letter from the national security adviser's office reporting the sighting of an unidentified aircraft flying over the presidential villa.

The letter, titled "Warning to All Operators Against Flying Into Restricted and Prohibited Areas," was addressed to operators and owners.

Source: Legit.ng

Zainab Iwayemi avatar

Zainab Iwayemi (Business Editor) Zainab Iwayemi is a business journalist with over 5 years experience reporting activities in the stock market, tech, insurance, banking, and oil and gas sectors. She holds a Bachelor of Science (B.sc) degree in Sociology from the University of Ilorin, Kwara State. Before Legit.ng, she worked as a financial analyst at Nairametrics where she was rewarded for outstanding performance. She can be reached via zainab.iwayemi@corp.legit.ng