Vladimir Putin’s barbaric invasion of Ukraine has escalated the crisis in Nigeria’s beleaguered civil aviation industry to calamitous proportions. The prohibitive cost of imported aviation fuel and offshore maintenance of aircraft with a persistently depreciating naira remains insurmountable burdens for airlines.
Now everything is heading precipitously down the abyss as Russia’s invasion of Ukraine pushes oil price to record highs. The pump price of aviation fuel was N190 per litre in January 2021 when crude oil price hovered around $60 per barrel.
In January 2022 with crude oil price at $90, the greedy merchants in Nigeria’s aviation fuel supply chain enigmatically pushed the pump price to N415 per litre.
Commercial airlines responded to the high cost of aviation fuel by raising air fares by 100 per cent from an average of N25, 000 to a minimum of N50, 000 for an hour flight.
Last week, the situation worsened as America’s ban on Russian crude oil exports momentarily escalated oil price above $130 per barrel.
Last Thursday, the pump price of aviation fuel surged to N700 per litre in some Nigerian airports, before a timely intervention by the national assembly knocked some sense into the heads of the cabal controlling fuel supply.
The cabal had engineered an artificial scarcity even as the government’s agency regulating fuel distribution insisted that it had enough aviation fuel to last for 34 days.
The criminals halted direct sale of aviation fuel and assigned it to illegal outlets that demanded outrageous pump price which forced airlines to cancel flights as the illegal retailers insisted on down payments for fuel yet to be delivered.
Airfares remained at N50, 000 per one-hour flight throughout last week except for increases for tickets purchased few hours to the take-off of the flight.
Industry watchers warn that crude oil price would remain above $100 per barrel throughout 2022 if western sanctions effectively keep 70 per cent of Russian crude oil out of the market. That is bad news for Nigerian airlines.
The federal government is responsible for the crisis in the airlines. Two federal agencies are working at cross purposes in the raging controversy over airfares.
The Nigeria Civil Aviation Authority (NCAA) believes that airfares in Nigeria are deregulated and that commercial airlines have the right to fix fares in accordance with the dictates of the interplay of the invisible hands of the market forces of demand and supply on the price mechanism.
Conversely, the Federal Competition and Consumer Protection Commission (FCCPC), insists that the 100 per cent fare increase that came into force three weeks ago was the product of a grand conspiracy by airline operators and consequently a criminal offence that could lead to the prosecution of defaulting airlines.
On Tuesday, March 2, 2022, FCCPC announced the discovery of evidence of conspiracy in the fare hike by airline operators and ordered the airlines to revert to old fares.
Two weeks into the order from the FCCPC, the airlines are still operating with the fare hike as if nothing has happened.
The situation reminds one of a directive by the U.S. Air Force to Lt. Flynn, America’s first female pilot of a B-52 strategic bomber. Flynn was determined to marry a non-commissioned officer under her command.
The U.S. Air Force argued that the marriage would compromise Flynn’s authority and ordered her to terminate the plan.
Flynn countered that the air force has given her a directive she cannot obey since it cannot provide her a husband. She ignored the order and lost her commission.
FCCPC has given the airlines an order they cannot obey. The true situation about airfares lies somewhere between the position of NCAA and that of FCCPC.
The federal government knows pretty well that the airline industry is deregulated. However, FCCPC believes that it can only protect consumers under partial deregulation.
Ground service providers in the industry hiked the cost of their services from N20, 000 to N70, 000 per flight without anyone lifting a finger in protest. The airlines grudgingly complied because they had no one to complain to.
The pump price of aviation fuel rose from N190 to N415 within one year without even the regulator demanding an explanation.
Last Thursday, the price momentarily surged to N700 per litre while everyone expects the airlines to bear all the burden of the additional cost.
The solution to the ticking time-bomb in the civil aviation industry is for the federal government to add aviation fuel to the list of regulated refined petroleum products and fund the consequent subsidy.
That will simply double the consumption figure of the product as the Nigerian National Petroleum Company (NNPC) Plc takes a pound of flesh from the subsidy.
Petrol subsidy fraud has placed the economy in advanced stage of hemorrhage. No one wants to add aviation fuel to that.
In other parts of the world, aviation fuel accounts for 30 per cent of the cost of flight. In Nigeria it accounts for 70 per cent because of the insidious behavior of the cabal controlling the market.
There is no way anyone can deregulate the pump price of aviation fuel and regulate airfares at the same time. It is a senseless contradiction pushing the airlines down the precipice. They just cannot survive.
A Boeing 737, the most popular aircraft in the fleets of Nigerian airlines, burns 3,928 litres of aviation fuel for a one-hour flight. At the pump price of N700 per liter last Thursday, that amounts to N2, 749,600.
Depending on the configuration, a 737 carries up to 150 passengers. At the current air fare of N50, 000, that amounts to N7.5 million for the flight. With aviation fuel taking more than a third of the total sum raised in the flight, one wonders how an airline can survive by wading through the bureaucratic bottlenecks erected by FCCPC each time it has to raise fares.
The federal government would be cruel to the airlines if it insists on regulating airfares when it has no control over the pump price of aviation fuel.
FCCPC can protect consumers by curtailing the arbitrary fare hikes that compel air travelers to pay anything from an additional N30, 000 for a one-hour flight when the ticket is purchased a few hours to flight time.
It can compel the cabal controlling aviation fuel supply to ease its merciless grip on the market. It cannot tell airlines what to charge for a flight in an industry in which the pump price of aviation fuel, a key component of the operation, is determined by the impulses of ruthless men.
