Air Peace and Other Airlines Face Closure as Jet Fuel Price Rises by 109%

In the face of a relentless increase in aviation fuel prices over the past two years, Air Peace and airlines in Nigeria find themselves compelled to adjust their operations by hiking ticket prices. 

Between July 2023 and February 2024 alone, local carriers grappled with a staggering 109% surge in fuel costs.

The nation’s 12 scheduled airlines, including major players like Air Peace, Aero Contractors, and Arik Air, have been striving to stay afloat amidst the tumultuous price swings. 

From a modest N629 to a daunting N1,316 per unit, the surge in jet fuel prices has presented an unprecedented challenge to the industry.

Struggle for Air Peace and Other Airlines Sustainability Amidst Rising Costs

However, with the situation showing no signs of abating, there are murmurs among Air Peace and some airlines about the possibility of discontinuing operations, as revealed by reliable sources.

The Chief Operating Officer of Ibom Air, Mr. George Uriesi, lamented the relentless fluctuations in fuel prices, which currently hover between N1,300 and N1,500. 

Uriesi emphasized the enormity of the challenge, noting that the exponential rise in fuel costs, from approximately N200 to N1,500 in just two years, has left airlines grappling for survival.

• “It is a massive challenge because fuel is the major cost. In two years, it has gone from about N200 to N1,500. No matter how prudent an airline is, it cannot absorb that kind of increase in the major cost input. 

The increase is so massive that it is difficult to attack by raising fares.

We think that we have reached the plateau in terms of using fares to absorb all these inflationary issues – the value of the naira and the increase in the price of fuel, which are the two most important components for a domestic airline.

Uriesi articulated the dilemma faced by airlines, highlighting that, despite their best efforts to maintain affordability, the drastic increase in operational costs renders the conventional strategy of raising fares ineffective. 

He underscored the critical role of the exchange rate and fuel prices as primary determinants of domestic airlines’ viability.

Furthermore, the Managing Director of Aero Contractors, Captain Ado Sanusi, warned of a worsening scenario if Nigeria fails to commence refining Jet A1 domestically.

Calling on the Government to Intervene

Sanusi pointed out that the cost of fuel, which previously accounted for 35 to 40 per cent of Air peace and other airlines’ expenses, has now surged to nearly 80 per cent, and in some cases, up to 95 per cent.

Sanusi urged the Federal Government to enhance transparency in jet fuel importation processes, advocating for the publication of fuel prices by regulatory bodies like the Department of Petroleum Resources (DPR). 

He emphasized that such measures would help dispel concerns about price-fixing cartels and stabilize the market, thereby alleviating the burden on struggling airlines.

• “Air Peace and other airlines increase the prices of their tickets and transfer the cost to the customer. Until we start refining jet fuel in the country, we will depend on imports.

• While we are depending on import, we are looking at the cost with a naira to dollar exchange rate. 

• I don’t know whether Dangote and Port Harcourt refineries are equipped to refine Jet A1, but even if they are, it would take a little bit of time before we feel the impact.”

As the aviation industry grapples with these challenges, stakeholders await decisive action from authorities to safeguard the viability of Nigerian airlines amid the volatile fuel market.