Friday, June 14, 2024

High Air Fares Are Hurting Businesses

Airlines are an integral part of every economy. They promote trade, tourism, and hospitality, as well as connect businesses, which help to drive economic growth and development. According to the National Bureau of Statistics, NBS (2023), the aviation sector contributed around 4% of Nigeria’s gross domestic product (GDP) in Q2 2022, supporting about 200,000 jobs and paying N8.5 billion in taxes annually. In Q3 2023, air transportation’s real GDP was N22.6 billion. These numbers are indicative of the essentiality of the aviation sector to the Nigerian economy and its vital role in shaping the economic landscape of the country.

However, there are growing concerns about the high fare prices in the sector and their impact on businesses. Both domestic and international flight prices have increased substantially over the months due to the increasing costs of operations in the sector. For instance, the price of aviation fuel has propped up significantly due to foreign exchange constraints and the increase in crude oil prices in the international market, which has directly fed into the price of flight tickets.

Although the economic benefits of the aviation sector are evident, high fare prices can have far-reaching consequences for businesses, particularly small and medium-scale businesses, limiting their growth potential.

As is now the case, business operations can be significantly hampered by high airfare, especially for those businesses that rely on frequent air travel. Consequently, this will have implications for profit margins and the ability of such businesses to expand. Also, limited access to affordable air travel can hinder businesses from exploring new opportunities, establishing domestic and international partnerships, and even constraining businesses from attending trade fairs that can boost their competitive edge.

Another important point to note is that affordable air travel helps to promote economic inclusiveness by allowing a larger proportion of the Nigerian population to participate in economic activities. When airfares are increasing, several individuals and businesses are excluded from harnessing the potential economic opportunities that the aviation sector can unlock.

As Nigeria tries to position itself as a global economic player, the role of the aviation sector will become increasingly critical. The government and industry stakeholders must collaborate to develop strategies that can improve the accessibility and affordability of air transport. The government must engage with airlines to understand their major concerns, which can act as a starter to an effective solution. Moreover, the government must consistently pursue policies that improve dollar liquidity, particularly in key sectors of the Nigerian economy, such as the aviation sector.

Conclusively, Long-term planning to refine crude oil in Nigeria remains the most significant strategy for reducing the cost of doing business in the sector.

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