Finance

Forex scarcity: Airlines worried as operational cost rises

Naira exchange rates November 2022

There is no end in sight to the operational challenges confronting domestic airlines following the seemingly unending naira depreciation and scarcity of foreign exchange, Daily Trust reports.

With one dollar exchanging for N502 at the parallel market on Monday, operators said the development portends serious threat to operation even as they are not ready to hike ticket price far beyond what members of the flying public can afford.

Already, there has been about a 100 percent increase in ticket price depending on the routes amidst forex scarcity with operators resorting to the black market to meet their needs.

The development has stymied the airlines’ capacity to bring back their aircraft that have been ferried abroad for routine maintenance (c-check).

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Aero Contractors, Nigeria’s oldest airline, through its Aero Maintenance Organization (AMO), tried to provide maintenance but was limited, hence many airlines have to go abroad for the routine maintenance which costs an average of $1.8 to $2.5m.

Besides, the forex devaluation has jacked up the price of aviation fuel (Jet A1) which is currently hovering between N250 and N270 from N110 and N160 it was sold six years ago.

Nigeria’s biggest airline, Air Peace, disclosed recently that it has about 20 of its aircraft abroad. One of them just arrived last week while other airlines also have their aircraft stranded abroad since COVID-19 lockdown.

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Barr. Shehu Wada, an executive of the Airline Operators of Nigeria (AON) and official of Max Air said the forex instability is of great concern to airlines.

“Aero Contractors, which has a maintenance facility, has a limitation and we still have to go abroad. This is really not a funny thing. It is giving us serious challenges as airlines.

“The government’s window is not available. If you apply, you get frustrated and you cannot compromise safety. You have to strictly follow the regulatory requirements in terms of aircraft checks and maintenance.

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“In addition to the regulatory oversight, you also owe it a duty to humanity to do the right thing and not compromise safety and there is little by which you can increase ticket prices.”

He called for a special window for airline operators to reduce the impact of the forex scarcity on their operations.

“Recovery in Nigeria aviation was very rapid. The problem now is capacity. The major challenge is sourcing the foreign exchange and that is the most disturbing thing,” says the Chief Executive Officer of Aero Contractors, Capt. Abdullahi Mahmood.

Tribune

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