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Airline passengers may pay more for less
Ayo Olesin
News that domestic airline operators would increase air fares from N9,000 to N10,000 for a one-hour flight should not come as a surprise. Rising fuel prices since the beginning of the year dictate that airfares would inevitably climb in tandem with the upward price movement of aviation fuel, which accounts for 16 per cent of airlines' operational costs.
At the peak of the recent oil shock, when crude prices breached the $40 per barrel mark, the big carriers in Europe and the United States were constrained to impose a special fuel surcharge on tickets.
The International Air Transport Association raised the alarm, about a month ago, that the gradual recovery of the airline industry, post 9/11, would be quickly eroded if high oil prices were sustained.
The oil market volatility has tasked airline industry planners and jet fuel buyers who have to stay glued to their computer screens to take advantage of even the slightest movement in world prices.
Nigerian airline operators are not insulated from the international market situation, as deregulation of the oil downstream means that jet fuel prices are now dictated by market forces.
Apart from the cost of fuel, domestic operators have had to operate under a harsh environment generally. Achieving break-even load factor - put at 40 per cent- on most flights would be a miracle.
Indeed some flights are mere "ferry flights", but operators have to keep to schedules to win passenger confidence. For the operator of an airline that will burn fuel worth N150,000 to N200,000 per hour, this is not funny.
Airlines also have to contend with a myriad of taxes associated with the aviation industry - landing and parking fees; high staff costs, logistics costs and the all important periodic and mandatory aircraft checks that can cost up to $2 million for 'D' Check on a mid-sized jet.
This is why the mortality rate in the domestic airline sector is high. Even those still in the air, with the exception of one or two, operate aging and inefficient fleet of fuel guzzling and noisy aircraft. Most of the players in the industry are in debt, owing the airline regulatory agencies, which have also increased tariffs, hundreds of millions of naira.
Agreed, airlines have to hike fares to remain afloat, but service delivery must improve. Passengers are sick of "pilot silence" on rough flights; shabby cabins; constipation-inducing pastries on the in-flight service tray; rude ticketing staff ;non-adherence to schedules and the general failure to totally eliminate the agbero mentality from the industry. They need more modern equipment, otherwise, customers will only be paying more for less.
But the reality of the situation is, as some airline operators have said, that airfares are likely to climb even higher, and the market will not collapse, because those who must fly will fly. Passengers can be sure that increasing competition will keep airlines in check, even though they operate as a cartel for now. The main challenge, for local airlines however is to take advantage of the recent air route licensing round that has given them access to some international routes.
The Punch, Friday July 16, 2004
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