Nigerian airlines have accumulated more than N60bn in loans from local banks to finance the purchase of aviation fuel amid persistently high Jet A1 (fuel) costs, the Airline Operators of Nigeria has said.
A member of the Board of Trustees of the AON, Roland Iyayi, disclosed this to Sunday PUNCH, saying the airlines were being forced to borrow heavily to sustain operations as the cost of aviation fuel continued to put pressure on their revenues.
“There are some airlines that are owing over N60bn from local banks just to be able to procure fuel. That’s how bad it is,” Iyayi stated.
He said the worsening financial burden was a consequence of the government’s failure to implement measures recommended by stakeholders to address the high cost of aviation fuel.
According to him, the AON had threatened to shut down operations in February following the escalation in fuel prices, prompting the Minister of Aviation and Aerospace Development, Festus Keyamo, to intervene.
“The AON had threatened to shut down because of the escalated fuel costs in February. Then Keyamo was in Riyadh. He called to say that the AON should allow him to get back and look at all the issues so he could address them.
“He said everything would be resolved. Yes, meetings were held. The NMDPRA (Nigerian Midstream and Downstream Petroleum Regulatory Authority), the fuel marketers, AON, we all met in his office.”
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Iyayi, however, said the meeting did not result in concrete measures to reduce the burden on operators, adding that a committee comprising the NMDPRA, oil marketers and the AON was subsequently constituted.
“Of course, the meeting was really not any meeting where anything could be resolved. There was a committee that was set up to see what immediate steps could be taken to address the issue of fuel costs. That committee had the NMDPRA, the oil marketers and AON.
“I represented AON. However, what we came up with were recommendations to the government to indicate that certain things should be done. But to date, nothing has been done.”
He said Nigeria’s aviation fuel prices remained significantly higher than those in other parts of the world.
“There hasn’t been any intervention by the government to address the issue of why it is that fuel price in Nigeria is 270 per cent of the original value. Whereas other parts of the world are recording 60-80 per cent. So Nigeria is a peculiar case. That’s what the airlines are saying.”
The AON official also said the fuel crisis had affected the airlines’ ability to meet their statutory obligations, including remitting the five per cent ticket sales charge to the Nigeria Civil Aviation Authority.
“Now, the ripple effect of the fuel price is that the airlines are not able to remit the five per cent ticket sales charge to the NCAA simply because all the earnings from ticket sales are put towards buying fuel for the operation. The alternative will mean that the airlines will shut down completely, there won’t be any services, and the entire economy will ground to a halt.
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