Air Peace Limited has revealed that for every one-hour flight the airline operates, it spends N7 million to purchase 4,000 litres of aviation fuel and about $4,000 for the Aircraft, Crew, Maintenance, and Insurance (ACMI) leasing obligations.
The airline’s Chief Operating Officer (COO), Mrs Oluwatoyin Olajide, disclosed this at a news conference on Friday in Lagos, as reported by the New Agency of Nigeria (NAN).
Mrs Olajide noted that Air Peace spends over N14 million for operating a one-hour flight, of which the cost of aviation fuel accounts for 60-65%.
“There are factors that define operating cost and they include aviation fuel which takes between 60 per cent to 65 per cent of the operating cost.
“One litre of fuel is N1,400. If I have to operate a one-hour flight from here to Abuja, Port Harcourt, and Owerri, I am going to be using about 4,000 litres of fuel.
“So, on average, a one-hour flight costs N7 million on fuel alone. Also, ACMI costs $4,000 for leasing planes, considering the challenges we are currently facing,” Olajide said.
She further disclosed that the significant interest rate of about 30% for borrowing money from institutions within the country and the fact that Nigerian airlines pay four times more than others for spare parts further exacerbate the cost of airline operations in Nigeria.
Air Peace’s COO noted that due to the significant cost of operations airlines face in Nigeria, a one-hour trip within Nigeria should cost not less than N500,000.
What you should know
One of the major challenges local airline operators in Nigeria face is their inability to secure aircraft under dry lease conditions which is more favourable than the wet-lease option (or ACMI) or outright purchase.
However, for the past few months, there have been significant milestones that have been achieved in the Nigerian aviation space that promise the possibility of local airlines securing aircraft on dry lease terms from aircraft lessors and manufacturers.
- The new Practice Direction establishes legally binding rules that reaffirm Nigeria’s commitment to its CTC obligations, instructing courts to apply the Convention without interference from other legal provisions in relevant cases.
- In November 2024, Boeing announced its commitment to coordinate with global lessors to prioritize Nigerian airlines with concrete plans for aircraft leasing over the next 24 months as the aerospace giant formally invited the Minister of Aviation and Aerospace Development, Festus Keyamo, and the Nigerian delegation to the Airline Economics Conference in Dublin, Ireland, scheduled for January 12th to 15th, 2025.
- There is, however, one more milestone that is yet to be achieved towards ensuring the facilitating of dry-lease arrangements for local airlines. The Aviation Minister has said international aircraft lessors and manufacturers require insurance to be sourced from the international market, not locally, before they can bring aircraft into Nigeria on dry-lease terms.
The challenge is the National Insurance Commission (NAICOM), the agency responsible for regulating and controlling the insurance business in Nigeria, mandates that all risks within the country be insured locally.
However, the aviation minister has revealed that there are ongoing discussions to make NAICOM ease this rule for dry lease transactions.