Aviation Fuel Cost Bites Hard as Nigerian Airlines Borrow N60bn to Sustain Flight Operations
- The Airline Operators of Nigeria said some airlines have borrowed more than N60bn from local banks just to cover aviation fuel costs
- An AON board member said Nigeria's jet fuel prices stand at 270% of the global benchmark, far above the 60-80% recorded elsewhere
- Airlines have stopped remitting the 5% ticket sales charge to the NCAA because all ticket revenue is being used to purchase fuel
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Legit.ng journalist Victor Enengedi has over a decade's experience covering energy, MSMEs, technology, banking and the economy.
Nigerian airlines have collectively taken on over N60bn in debt from local banks to fund the purchase of aviation fuel, as persistently high jet fuel prices push carriers deeper into financial trouble, the Airline Operators of Nigeria (AON) has disclosed.
Source: UGC
Roland Iyayi, a member of the AON Board of Trustees, made the disclosure to Sunday PUNCH, warning that the situation had become dire for domestic operators.
"There are some airlines that are owing over N60bn from local banks just to be able to procure fuel. That's how bad it is," Iyayi said.
Why fuel costs are crippling airlines
Iyayi said the root cause of the crisis was the government's failure to act on recommendations from industry stakeholders aimed at bringing down aviation fuel costs. He pointed out that Nigerian airlines were paying roughly 270 per cent of the global benchmark price for Jet A1 fuel, compared with 60 to 80 per cent recorded in other parts of the world.
"There hasn't been any intervention by the government to address the issue of why it is that fuel price in Nigeria is 270 per cent of the original value," he said. "So Nigeria is a peculiar case."
He said the AON had threatened to suspend all flights in February over the worsening fuel costs, which prompted the Minister of Aviation and Aerospace Development, Festus Keyamo, to call a meeting involving the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), fuel marketers and the AON.
Iyayi, who represented the AON at those talks, said the sessions produced only recommendations to the government, with no concrete action following them.
"To date, nothing has been done," he added.
Airlines flying at a loss, NCAA debts mount
The financial strain has begun to affect operators' ability to meet regulatory obligations. Iyayi said airlines were no longer remitting the mandatory five per cent ticket sales charge to the Nigerian Civil Aviation Authority (NCAA), because all income from ticket sales was being redirected to fuel procurement.
"All the earnings from ticket sales are put towards buying fuel for the operation. The alternative will mean that the airlines will shut down completely, there won't be any services, and the entire economy will ground to a halt," he warned.
Source: UGC
He added that airlines had been unable to raise ticket fares enough to cover the surge in fuel costs, leaving them with no choice but to continue operating at a loss.
"The airlines are there, having to fly even though the operations are not profitable. They're more indebted now than they ever were. And yet the same government through the NCAA is insisting that airlines must pay up the five per cent ticket sales charge," Iyayi said.
He also noted that the AON had approached the government seeking relief on the historical debts owed by airlines, but said the request had been misunderstood.
Source: Legit.ng
