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Domestic airlines rue impact of high exchange rates

Airlines and industry players are groaning over the astronomical exchange rates as they are facing stringent operating environment with the value of the Nigerian currency plummeting further against the United States Dollar, a situation that is affecting business adversely.

Most airlines have continued to point out that despite their operational cost, apart from Jet A1 sourced locally in Nigeria, is moving to millions of dollars and they still earn their revenue in naira and have not even considered jacking up fares.

Nigerian airlines earn their revenue in naira, but most of their other costs including and not limited to purchase of aircraft parts, maintenance, aircraft leasing, payment for training, insurance and use of expatriates as technical personnel are charged in foreign currency.

Air peace
Air peace

Under condition of anonymity, an airline staff told NFD that the airline industry is worse hit and that almost all, if not all airlines have to pay experts from other countries for some technical operations and they, have to be paid in dollars.

“When we bring them in to do jobs we pay them in dollars and with the naira nose-diving this way, we are paying double of an unusually high amount and this is not going down well with the airlines as it is increasing their operational cost to almost 70-80 percent and when that happens, the airlines are no longer breaking even.”

“I say 70-80 percent and I am being economical because fuel, Jet A1 is 40 to 50 percent, and then there are the charges on the ticket price and now this inability to access dollar at a price convenient to do any business at all. And with payment to foreign technical personnel, you are paying two times the price of one.”

“Like if you pay someone US$ 200, 000, if that amounts to a certain amount let’s say two million naira before, now you are paying twice of that. And what if the airline is unlucky to have fallen into its maintenance cycle at this time, that airline will pay twice the cost, all this is not helping our business,” he said.

Aero Contractors
Aero Contractors

Other experts in the industry have also said that this is a trying time for aviation, according to them, with projections that the nation’s economy would face further downturn , airlines   might suffer lower patronage because many Nigerians who presently travel by air may prefer other  cheaper means of transport, which is a no-brainer.

Airlines may find it difficult to continue maintaining their aircraft, pay for leases, training, technical personnel and others, they may be forced to cut corners or go under, while others may lay off workers and also disengage the services of some aircraft in their fleet.

Already as bad as the downturn has hit, an airline has had to rest eight of their out of 13 and was operating with only five because it could not afford to pay for their checks.

By resting these aircraft, the airline would be losing a huge amount of daily revenue and it would still have to pay for leases, insurance and the personnel, including pilots and engineers.

The Executive Director, Technical Services, Med-View Airline, Engr. Lookman Animashaun who spoke on the effect of the naira fall against the dollar said that government should as a matter of urgency aid indigenous airlines to acquire dollars at the Central Bank of Nigeria (CBN) exchange rate for their many transactions.

Medview Airline's Boeing 737-800
Medview Airline’s Boeing 737-800

Animashaun was emphatic on the way the help for both challenges should come, empathizing that the airline understood the situation government is in but stated that airlines should be treated exclusively too in the sourcing for funds.

According to him, the airline business is riddled with a lot of costs and all of them are dollar based from buying parts to other essential services, he however lamented that despite the skyrocketing of the dollar ticket prices have not increased and airlines are feeling the brunt.

“ One of our major problem in the industry is dollar based, all the spares we procure are done so in dollars and we bring them in  a daily basis and we also have to source for dollar to fund these things, it has not been easy.”

“You can imagine the value for the ticket has not increased but the dollar exchange rate has gone astronomically high,” he said.

On what government should do, Animashaun canvassed,” Government should help the industry by allowing them to access funds through the use of the CBN exchange rate for our transaction.”

About NigerianFlightDeck

Nigerianflightdeck is an online news and magazine platform reporting business stories with a bias for aviation and travel. It is borne out of the intention to inform, educate as well as alter perceptions with balanced reportage.

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