Nigeria Airfares Up Amid Falling Fuel Prices

Over the last year, oil prices have dropped by more than 50 percent. Motorists filling up at fuel stations know that prices at the pump have dropped precipitously.

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But consumers seeking for commercial airline tickets saw that airfares had not dropped along with oil prices.

Arik-plane-640x480.pngSharon Mclean, an aviation expert said most airlines are now in fuel contracts that reflects the plummeting global oil prices, and wonders why the price is not falling especially in Africa.

In most routes in the United States and Europe airline prices has dropped.The US Bureau of Labour Statistics in a January report  said air fares by foreign travellers on US airlines fell 15.0 per cent in 2015, the largest calendar-year drop since the index was first published in 1987.

The decline in ticket prices was steepest for air travel to Latin American and Caribbean (down 17.8 per cent), but there were also big drops in fares to Asia (down 14.6 per cent) and Europe (down 11.7 per cent).

The International Air Transport Associated (IATA) late last year said that ticket prices have not been cut because airlines are still in contracts for fuel that pre-date the previous months’ oil prices fall. IATA represents 240 airlines or 84 percent of total air traffic.

Aviation Experts say with oil and jet fuel costs down two-thirds since last year, airlines can expect to reduce their overheads by about 20% leading to cheaper air fares across the globe.

Experts say fuel makes up about a third of an airline’s costs. With oil and jet fuel costs down two-thirds since last year, airlines can expect to reduce their overhead by about 20 per cent.

Some airlines said they are using the windfall in fuel costs to reduce debt and to make needed reinvestment in their infrastructure.

Travellers should not expect air ticket prices to fall with the decrease in the oil price, as the aviation industry is still recovering from high fuel prices from previous years, according to Per Second News.

Speaking to Per Second News in Lagos, a chief executive of one of the commercial airlines under the condition of anonymity said airlines in Nigeria are not looking at price cut at the moment.

“In previous years it (the oil price) was sitting at $120, and we’re still recovering from those losses. We are not at a position where we have recovered from those losses,” Ms Kirsten King, financial director at Comair, the British Airways franchisee  said.

The lower fuel price is “counterweighted” by a weak currency, said Paul Ejike, an airline consultant in Lagos.

“The impact of a lower fuel price is counterweighted by the substantial weakening of the Naira — keeping in mind that a large portion of airline input costs are monetised in foreign currency,” said Mr Ejike.

“A stable Naira and a low fuel price will, in the medium term, benefit consumers in terms of travel cost.” However, the industry expects to continue to benefit from a lower fuel price.

Source: Victoria Ayuwei, Per Second News

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