Tuesday, February 22, 2022 / 01:28 PM / by CSL Research / Header Image Credit: Nigerian Price

Based on local print media sources, the cost of air tickets along major routes across the country has more than doubled due to the unexpected increase in aviation fuel (Jet A1). Prior to the recent hikes, a one-way ticket for a flight to Abuja from Lagos on an economy package would range between N30,000 and N40,000, depending on the airline. However, according to reports, the same route fare is currently over N50,000. Based on our findings via bookings on Max Air, we observed a one-way ticket for a trip on the Lagos-Abuja route would cost between N50,000-N53,000 for a Wednesday flight trip. Likewise, another airline operator, Arik Air, offers the same ticket at a price of N56,000. Similarly, Air Peace pegs its ticket fares at around N50,000. Thus, while it can be confirmed that most airlines have raised prices, the increment varies and, based on our survey (across several airlines), prices have increased by c.40%.

The increase in air ticket fares stem from many factors, however, the airline operators under the aegis of Airline Operators of Nigeria (AON), noted that a major challenge faced include the unavailability of aviation fuel amidst the rising cost of fuel, causing flight delays and cancellations for some airlines on the date of departure. For instance, the cost of Jet A1 is up from c.N190-N230/ litre to above N410 in Lagos, N422 in Abuja and Port Harcourt, and N429 in Kano, and appears poised to rise further. Added to this is the perennial shortage of FX for spare parts and maintenance.

The aviation sector was one of the sectors worst hit by the pandemic, causing airlines to abandon the skies and punctuating the interesting prospects of that year. The sector recorded -36.98% in 2020 from a GDP growth of 13.2% in 2019. Currently, the sector which was once on its knees has gotten back to its feet as the green shoots of recovery are emerging. From the Q4 2021 GDP report, the sector posted a growth of 19.7% in 2021, returning to pre-pandemic levels. The reopening of the economy in Q3 2020 and price increments are factors that must have supported growth. Also, the low base in 2020 and intervention in form of a N4.0bn bailout fund by the government must have aided the growth seen.

As things stand, it appears that the woes of the airline operators are far from over, as there are speculations of a further increase in air tickets if the cost of Jet A1 continues to rise. In our opinion, given the systemic importance for the conduct of trade and other economic activities in the country, we believe passengers will have no choice but to pay whatever increase operators demand especially as it is considered one of the safest channels for transport in light of the alarming insecurity faced by users of other means of transport. However, the FG, industry stakeholders will need to address the aviation fuel supply chain disruptions to avoid flight delays and cancellations.