Nigerian domestic airlines have accumulated over ₦60 billion in loans from local commercial banks to purchase aviation fuel (Jet A1) amidst skyrocketing operational costs, the Airline Operators of Nigeria has revealed. Roland Iyayi, a member of the Board of Trustees of the AON, disclosed that operators are taking on heavy debt burdens simply to keep their fleets in the air, with some individual airlines carrying debt portfolios exceeding ₦60 billion dedicated solely to fuel procurement.
This worsening financial crisis stems largely from unfulfilled government commitments following a major industry standoff earlier this year. When the AON threatened a total operational shutdown in February over surging fuel prices, the Minister of Aviation and Aerospace Development, Festus Keyamo, intervened to set up a committee comprising representatives from the AON, oil marketers, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority. Despite submitting actionable recommendations to lower the cost burden, no concrete policy measures have been implemented to date.
The disparity between international and local market conditions has further compounded the operators' distress. While global aviation fuel prices fluctuate between 60% and 80% of baseline costs, price tags in Nigeria remain drastically inflated at roughly 270% of original values. External factors such as the Middle East conflicthave driven Jet A1 prices from ₦900 per liter in late February to as high as ₦3,300 per liter, creating an unsustainable environment for domestic carriers.
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The severe liquidity squeeze is severely impacting operators' ability to meet statutory obligations. Because nearly all incoming revenue from ticket sales is immediately diverted toward purchasing fuel, airlines are unable to remit the mandatory five percent Ticket Sales Charge to the Nigeria Civil Aviation Authority. To complicate matters, when the AON requested a 100% write-off of historical debts belonging to defunct, moribund airlines to clean up the sector's general ledger, the government misconstrued the request as a 30% debt relief on active airlines, leaving the root balance sheet issues unresolved.
Compounding these struggles is the inability of airlines to pass rising costs onto consumers without destroying flight demand. Chibuike Uloka, spokesperson for United Nigeria Airlines, pointed out that fuel currently consumes around 50% of total revenue. When paired with multiple statutory taxes, operators are left with insufficient funds to handle essential needs like staff salaries and aircraft maintenance. Operating at continuous financial losses, domestic carriers warn that unless immediate regulatory interventions take place to address fuel costs and taxation, the entire aviation sector risks reaching an inevitable shutdown.
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