Nigerian Airlines Rely on Bank Loans as Fuel Prices Rise

Nigerian airlines are turning to commercial bank loans to keep their operations going. This comes as the cost of aviation fuel continues to hit the industry hard.

Allen Onyema, the CEO of Air Peace and vice-president of the Airline Operators of Nigeria (AON), shared this news on Tuesday.

Mr Onyema said airlines are finding it tough to stay afloat with both fuel prices and borrowing costs going up sharply.

In an interview on Arise Television, he stated that the price of aviation fuel, known as Jet A1, has surged by over 250 per cent in recent months. It shot up from around N900 per litre to as high as N3,300, forcing airlines to rely heavily on loans.

"We have all borrowed and borrowed billions just to buy fuel alone and fly. We just fly for the fuel vendors," he said.

"No Nigerian airline is smiling now."

He added that the cost of running a single flight has jumped significantly. Fuel costs that were around N3 million per flight now range between N12 million and N13 million.

Mr Onyema also mentioned that airlines are facing high interest rates, which he estimates are between 29 and 33 per cent. This makes borrowing even more expensive and hard to manage.

Many airlines have had to cut back on flight schedules to minimize losses. He described the current operating environment as very tough.

He pointed out that part of the rising costs comes from problems in the aviation fuel supply chain. He said multiple middlemen drive up prices before fuel reaches the airlines.

He noted that fuel bought through deals linked to the Dangote refinery via MRS is still the cheapest option. However, distribution issues still affect final costs.

Mr Onyema warned that without quick policy changes, more airlines could go under due to financial strain.

He mentioned that over 70 airlines have shut down in Nigeria over the years. He called the sector one of the most fragile aviation markets in the world.

He also criticized the five per cent ticket sales charge imposed by the Nigerian Civil Aviation Authority (NCAA). He sees this as an extra burden on struggling airlines.

"If those charges are not reviewed, airlines will continue to crumble in this country," he warned.

While he praised the federal government’s efforts to improve aircraft leasing under the Cape Town Convention and suggested reforms, he urged a thorough review of aviation taxes and charges impacting the industry.

Earlier, the Nigerian Civil Aviation Authority listed 11 domestic operators on a "no-pay-no-service" sanction list over unpaid obligations. However, enforcement was put on hold due to worries about rising operational costs and the stability of the industry.