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Nigerian airlines cry out as rising costs, shrinking demand threaten industry



The Airline Operators of Nigeria (AON) have sounded the alarm on the challenges plaguing the industry, citing rising costs, shrinking passenger traffic, and difficulty accessing foreign exchange as key threats to their survival.

A statement issued Friday by Spokesman Obiora Okonkwo, AON highlighted several factors contributing to their predicament:

Increased Costs: The statement emphasizes a domino effect of rising costs across the aviation ecosystem, including ground handling services, airport charges, and aircraft maintenance. These increases, coupled with the scarcity of dollars, put immense pressure on airlines, forcing them to pass the burden onto passengers through higher ticket prices.

Shrinking Demand: Okonkwo points to a decline in passenger traffic due to the financial strain on Nigerians. Even for social events like weddings and funerals, people are opting for virtual participation through credit alerts instead of travel, further impacting airlines’ revenue.

Fleet Renewal Challenges: The statement notes the difficulty airlines face in acquiring new aircraft due to “country risk” perceptions. Despite meeting lease agreements and standards, Nigerian airlines struggle to secure necessary financing due to concerns about the overall economic climate and currency stability.

Foreign Exchange Access: Okonkwo criticizes the Central Bank of Nigeria (CBN) for failing to provide airlines with the foreign exchange they need to operate efficiently. Despite some airlines depositing funds with the CBN, access to dollars remains a significant challenge.

These concerns paint a bleak picture for the Nigerian airline industry, highlighting the potential for further disruptions and even service suspensions if these challenges remain unaddressed.

READ ALSO:CBN injects fresh $64m, says payment of all verified FX claims by foreign airlines concluded

The statement reads, “We are making losses on factors that are beyond our control. We are not only faced with the problem of scarcity of dollars; even the aviation ecosystem is feeling the heat. Handling companies have increased the cost of their services, airports have increased their charges and those that service the aircraft have also increased the cost of their services. The monies for these payments are coming from the passengers who are already exhausted financially.

“Passenger traffic has shrunk because even those on social engagement like weddings, burials and other ceremonies may not be inclined to spend money on flight tickets; they would rather send credit alerts to those hosting the events who would appreciate such gestures. So, they pay instead of appearing in person.

“It is impossible to bring in more aircraft. Aircraft owners have become skeptical because of country risk. A Nigerian airline may meet its terms, and all the standard criteria but the aircraft owners consider country risk above other factors. Country risk supersedes everything and lessors have their own obligations. So, there is nothing personal. Some airlines deposited money with the Central Bank of Nigeria but they cannot provide us the needed dollars.”

The AON’s statement raises concerns about the potential consequences of these challenges, including:

Higher Ticket Prices: Further cost increases could lead to even higher ticket prices, making air travel less accessible for many Nigerians.

Reduced Service Availability: Airlines may be forced to reduce flight frequencies or even suspend certain routes due to financial constraints.

Job Losses: The airline industry employs a significant number of Nigerians, and job losses could have a ripple effect on the wider economy.

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