Airlines Under Siege: FX, Fuel & The Cost of Staying Airborne

By OBIOMA TORI

FOR passengers, Nigeria’s aviation crisis is often experienced as a delayed departure, an unexpectedly expensive ticket or a cancelled flight. Behind those familiar disruptions, however, lies a more fundamental financial problem that threatens the viability of domestic carriers: the industry earns predominantly in naira but depends heavily on dollar-denominated inputs.

The scale of the mismatch is striking. Industry estimates suggest that almost 90 per cent of airline operating costs are denominated in foreign currency. That includes aircraft leases, insurance, maintenance, spare parts, engine repairs and aspects of technical training.

Every Naira Shock Becomes an Aviation Shock

The implications are straightforward but severe.

An airline does not have to acquire another aircraft for its expenses to increase. If it has a fixed dollar lease obligation and the naira weakens, the amount it must generate in local currency to meet that obligation rises automatically.

Sam Onitilo, an aviation finance expert, estimates that four narrow-body aircraft under operating leases could generate monthly lease obligations of $400,000 to $700,000. A carrier with six or seven aircraft could face more than $1 million in monthly lease commitments before accounting for fuel, wages, airport charges and maintenance.

Such figures expose why smaller carriers are particularly vulnerable. A period of weak cash flow can quickly become a question of whether an operator can maintain its fleet.

The Maintenance Problem

Aircraft ownership or leasing is only the beginning of the financial burden.

Nigeria’s limited domestic capacity for major maintenance, repair and overhaul means that airlines often send aircraft, engines and components overseas. Major maintenance checks and engine overhauls can take place in Europe, the Middle East and other African aviation centres.

The industry is estimated to spend between $300 million and $400 million annually on offshore maintenance and technical support. Routine consumables such as tyres, brakes and filters are also largely imported.

This creates a paradox. Nigeria needs a larger and more reliable aviation industry, yet maintaining the aircraft that provide that capacity continually generates foreign-exchange demand.

Fuel Creates a Second Crisis

Then came the fuel shock.

AON said Jet A1 prices jumped from approximately ₦900 per litre in late February 2026 to around ₦3,300 within weeks. The association said the increase had become so severe that airline revenues were no longer sufficient to comfortably absorb fuel costs. AON President Abdulmunaf Sarina also disclosed that one airline had grounded its entire operation from mid-March because of the escalating cost.

For carriers already struggling with dollar obligations, higher fuel prices create another squeeze on working capital.

Taxation adds to the pressure. Air Peace Chairman Allen Onyema has warned against the proposed reintroduction of 7.5 per cent VAT on aircraft, engines and spare parts, arguing that it would increase the cost of fleet maintenance. He also said operators face about 54 taxes, fees and charges within the aviation sector.

Why Airlines Cannot Simply Raise Fares

The obvious response would appear to be higher ticket prices. But that solution has limits.

Passengers already facing high transportation costs can switch to road travel where practical. Higher fares may increase revenue per passenger while simultaneously reducing the number of people able or willing to fly.

Airlines are consequently caught between two difficult choices: absorb rising costs and weaken their balance sheets, or increase fares and risk losing passengers.

That is why the industry’s problems cannot be solved simply by asking airlines to charge more.

Government’s Leasing Experiment

The Federal Government has recognised aircraft financing as part of the structural problem.

In May 2026, the Federal Executive Council approved the establishment of the Nigeria Aircraft Leasing Company, structured as a private-sector-driven Special Purpose Vehicle with government backing. The initiative is intended to improve access to aircraft and address longstanding financing challenges confronting domestic operators.

Keyamo subsequently said the arrangement could allow local airlines to make payments in naira rather than dollars, potentially reducing their exposure to foreign-exchange shortages.

That could address one important part of the equation, although leasing alone cannot resolve fuel prices, offshore maintenance dependence, taxation or broader infrastructure weaknesses.

A Sector at a Financial Crossroads

Nigeria’s airlines are therefore facing several interconnected pressures rather than a single crisis.

Foreign-exchange volatility raises lease and maintenance costs. Limited local maintenance capacity sends more money abroad. Jet A1 prices are putting additional pressure on operating cash flows. Taxes and charges increase the cost base, while passengers have limited capacity to absorb endless fare increases.

The central issue is ultimately one of financial sustainability.

Until Nigerian aviation can reduce its dependence on foreign-currency obligations, expand local maintenance capacity and establish more predictable aircraft financing, the sector will remain vulnerable to every major naira and fuel-price shock.

The consequences extend beyond airline balance sheets. Fewer viable carriers mean fewer routes, less competition, reduced connectivity and higher costs for passengers and businesses.

What looks like a flight-delay problem at the airport may therefore be the visible symptom of a much larger problem: an industry whose revenues are local, but whose financial obligations are overwhelmingly global.