Less than two months after Nigerian airline operators suspended their plan to shut down operation due to the high cost of aviation fuel, following intervention by players in the oil industry, the operators have once again announced their plan to halt airline activities for the same reason.
Aviation fuel known as Jet A1 now costs N700 per liter. The airline operators under their umbrella body, Airline Operators of Nigeria (AON), said the cost is no longer sustainable as they have been subsidizing their services since the last four months, increasing their operating cost.
The airlines in question; Air Peace, Dana Air, United Nigeria Airline, Arik Air, Azman, Overland Airways and Aero Contractors said while aviation fuel cost about 40 percent of an airline’s operating cost globally, the present hike has shot up Nigeria’s operating cost to about 95 per cent.
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The body said in a statement that the cost of aviation fuel has rocketed from N190 per liter to the current N700, making it impossible for them to continue operation as it would mean charging as much N120,000 per a seat. A price they said Nigerians, under the current economic situation, cannot afford.
The statement reads: “It is with a great sense of responsibility and patriotism that the Airline Operators of Nigeria (AON) have carried on deploying and subsidising their services to our highly esteemed Nigerian flying public in the last four months despite the steady and astronomical hike in the price of Jet A1 and other operating costs.
“Overtime, aviation fuel price (JetA1) has risen from N190 per litre to N700 currently. No airline in the world can absorb this kind of sudden shock from such an astronomical rise over a short period. While aviation fuel worldwide is said to cost about 40% of an airline’s operating cost globally, the present hike has shut up Nigeria’s operating cost to about 95%.
“In the face of this, airlines have engaged the Federal Government, the National Assembly, NNPC and Oil Marketers with the view to bringing the cost of JetA1 down which has currently made the unit cost per seat for a one hour flight in Nigeria today to an average of N120,000. The latter cannot be fully passed to passengers who are already experiencing a lot of difficulties.
“While AON appreciates the efforts of the current government under the leadership of President Muhammadu Buhari to ensure air transport in Nigeria grows, unfortunately, the cost of aviation fuel has continued to rise unabated thereby creating huge pressure on the sustainability of operations and financial viability of the airlines. This is unsustainable and the airlines can no longer absorb the pressure.
“To this end, therefore, the Airline Operators of Nigeria (AON) hereby wishes to regrettably inform the general public that member airlines will discontinue operations nationwide with effect from Monday May 9, 2022 until further notice.
“AON uses this medium to humbly state that we regret any inconveniences this very difficult decision might cause and appeal to travelers to kindly reconsider their travel itinerary and make alternative arrangements.”
The aviation industry is not the only sector in Nigeria being affected by the rising oil prices. Earlier this week, telecom operators wrote a letter to the Nigerian Communication Commission, seeking approval to increase the cost of network services by 40 percent. The telcos citing the high cost of diesel, said they’re running on loss.The banking industry and manufacturers are not spared either. Both are lamenting as the cost of diesel, which powers their operation, has equally soared above N700.
The unaffordable cost of these needed petroleum products is attributed to lack of functioning refineries that would have minimized the costs as oil prices, spurred by Russia-Ukraine conflict, rise globally.
Nigeria is the ninth largest oil exporter in the world in terms of value, but has struggled over the years to refine its own products. This means, the African largest economy can only import refined products. The brute consequence of this predicament is now going beyond fuel subsidy, which is gulping over N7.5 trillion of Nigeria’s budget.
To curtail the deteriorating impact of non-functioning refineries, the Nigerian government is counting on Dangote Refinery, which is expected to start operation in July. But until then, many more industries will likely shut down.