Tough Times For Air Travellers As Airlines Raise Fares By 30 ...

By Margaret Nongo-Okojokwu

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Domestic airline operators in Nigeria are to raise their fares by 30% following an increase in the cost of leasing aircraft as well as higher insurance premiums by?foreign-based operators.
According to a recent report, International aircraft lessors?recently classified Nigeria among ?high-risk nations? in terms of doing business. The total cost of leasing an aircraft, like the popular Boeing 737 Classis series used by domestic airlines in Nigeria, has increased by over 60 per cent, rising from the monthly lease rental of $120,000 to $200,000.

The ?strange status? for the country is linked to the Sunday, June 3, 2012 crash involving Dana Air?s Flight 0992 in Lagos. Due to the air mishap which claimed the lives of passengers and crew members, major aircraft leasing firms such as GE Capital Aviation Services (GECAS), International Lease Finance Corporation (ILFC), Cab Tree and Aercap have raised lease on aircraft to Nigerian airlines by over 40 per cent and with a plan to hike it to 50 per cent soon.

Prior to the Dana accident, a B737-500, which was leased for $120, 000, now attracts $200, 000 monthly. For the new generation airplanes that are in high demand and popularly referred to as Next Gen (that is aircraft below 15 years), the lease, according to airline operators, has risen to $280,000 per month from $160,000. The development is coming on the heels of a recent increase in domestic airfares by airline operators by 20 per cent, from between N23,000 and N27,000 to between N28,000 and N33,000. IRS Airlines, for instance, raised its fares from N25,000 to N30,000, while the largest domestic operator raised its fares from N27,000 to N33,000. Aerocontractors Airlines is, nevertheless, still offering fares that are a bit cheaper for passengers who book and pay online.

Some airline chiefs who are affected by the development, have lamented that coupled with the declining passenger traffic, it has become very difficult for them to cope.

The lease remained stable from 2006 to June this year following near impeccable safety recorded in the aviation industry. Added to this, is the belief in the international aviation sector that Nigerian operators lack skills in negotiating for aircraft lease; which has led to most airlines to be on the receiving end. Most local airlines are said to lack the ability to understand minimum flight hour and engine cycles for aircraft under lease. Also, the dwindling of the sector, particularly the fortunes of the carriers, has equally made lease rentals to be on the high side because the foreign firms do not trust Nigerian operators enough with their equipment.

Currently, just three airlines among the hitherto big carriers are operating. Air Nigeria was over two months ago grounded over insolvency and safety issues. Dana Air remains grounded after the tragic accident that claimed over 153 persons, while First Nation Airlines has ferried its aircraft to Europe for mandatory maintenance checks. The airline is expecting its A320 airplanes back in the country. The new high cost of lease is expected to affect the whole fiscal operations of the airlines, as they now find it difficult to buy fuel, pay workers? salaries and still have enough operating cash. When the planned increase in fares is effected, the price of a round trip ticket for a one-hour flight will increase to between 37,000 (US$231) and 42,000 Naira (US$262), from the current average of 28,000 (US$175) and 33,000 Naira (US$206).

Airlines sources, who spoke under condition of anonymity, said the only option left for the operators was to ?adjust their airfares to the prevailing costs of operation?? caused by? the upward review of the cost of leasing an aircraft by leasing and insurance companies abroad.??Although domestic airlines have yet to conclude by how much they are likely to raise their fares, sources close to the airline chiefs said the planned increase might be about 30 per cent. The increase will be the second in recent times, coming closely on the heels of a 20 per cent hike in fares by the airlines. Nigeria?s domestic airline operators have been groaning under tough operational conditions, including rising cost of fuel.

It would be recalled that Senate President David Mark had earliar accused the Nigerian Civil Aviation Authority(NCAA) and others of conniving with Foreign airline operators to fix high fares. Specifically, Mark described the arbitrary price charged by British Airways and Virgin Atlantic as exploitative and unreasonable. Senator Hope Uzodinma (PDP, Imo West)? with 27 others in a motion entitled: ?Violation of Aviation Laws and Practices by Foreign Airlines in Nigeria,? alleged that the conduct of the ?British Airways and Virgin Atlantic actually translates to colossal loss of revenue by the Federal Government accruable from the statutory five per cent ticket sales charge, to the magnitude of $235 million or N3.7 billion, excluding heavy financial losses by travel agencies and Nigerian travellers.?

The Senate President,? who spoke during the debate of the motion? insisted that,? ?the prices given are completely out of range. It is unreasonable; it is exploitative and nobody should tell us to sit down here and not do anything about? it because Nigerians are willing to pay. ?Our regulatory agencies have done absolutely nothing. In fact, they are part of the problem because they have been conniving with them otherwise they would have been the ones to raise the issue. They have watched helplessly; they have refused to act otherwise they should be the ones to force British Airways to look at what they are doing.? He had? noted that? the Civil Aviation Act 2006 required amendment, adding that it had not provided for reprimand of persons who flaunt aviation laws in the country.

Meanwhile, industry experts have said that the proposed increase in fares as a result of? the rise in the cost of leasing airplanes by Nigerian operators is expected.

This proposed increase, which is still being examined critically by airline operators in view of the recent adverse effect of the Dana Air crash of June 3 on the flying public, is however being slated for implementation? soon, according to sources close to the development.

Source: http://www.nigerianorientnews.com/?p=1828

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