The price of Jet A1 has dropped remarkably at the international market for more than two years. Rather than the nation’s carriers and passengers enjoying the fiscal benefits of the crash in price, consistent increment in the price of the product has been the order of the day. Olusegun Koiki writes.
Global airlines are aiming to take advantage of the low oil prices to lock in fuel costs into 2017 and beyond, as price of crude oil currently crashed to $46 per barrel from the hitherto $130 per barrel some few years back. Jet A1 can account for between 20 and 50 per cent of an airline’s operating costs, depending on the region and country while swings in oil prices can mean a huge boost or hit to profits for airlines.
In December, 2015, International Air Transport Association, IATA, said lower fuel prices meant that airlines globally reported their strongest profit margins in more than five years. While global airlines are enjoying the fall in the price of Jet A1, the reverse is the case with Nigerian carriers who are still battling with scarcity and skyrocketing price of the product in the country.
Though, the sector had been deregulated for over half a decade ago by the Federal Government, but the recent deregulation in the price of Premium Motor Spirit (petrol) by the government led to another rise in the price of Jet A1 in the country’s aviation industry. Until recently, the price of the commodity went for between N114 and N116, but grew astronomically about three weeks ago to between N150 and N170 per litre depending on the airport an airline is purchasing from.
The scarcity and high price of the product have consistently led to disruption of flight operations by airlines over the past six months while hundreds of thousands of air travellers have had their planned journey scuttled unprepared within the period. In the wake of the scarcity of the product in the country, the nation’s carriers and their foreign counterparts have turned to neighbouring African countries for succour. Operators now fly to Ghana and Togo and others to purchase the product while depriving Nigeria of huge business revenues. Experts say that such diversion to other countries may cost Nigeria several millions of naira in revenue loss.
They also expressed fear that the cost of flying in the country, may go up any moment from now if the situation continues unchanged. Some few months ago, Arik Air management claimed it lost about $9 million in about 10 days to the Jet A1 scarcity, which has paralysed the Nigerian aviation industry. The Managing Director of the Airline, Mr. Chris Ndulue told journalists at the airline’s headquarters at the Murtala Mohammed Airport, MMA, Lagos that the scarcity, which has led to massive disruptions to its flight scheduled had also caused several delays and cancellations in the local scene, regional, America and United Kingdom.
According to him, Arik Air earned about $1 million daily from all its 120 flights, but noted that it was not easy to quantify the losses suffered so far. Ndulue specifically noted that the shortage supply of the product affected its now rested Dubai operations for days and had to fly out of Lagos to Kano, Accra or Cotonou airports to purchase fuel.
This is the experience with many of the airline operators like Med-View, Dana, First Nation, Overland and several others who continually struggle to get the product to fill their aircraft tanks. The Chairman of Airlines Operators of Nigeria, AON, Capt. Nogie Meggison in an inyterview with our correspondent said that the issue of high cost of aviation fuel has been a recurring issue in the country and must be addressed by the government. Meggison declared that aviation fuel takes about 40 per cent of airlines operating cost in Nigeria, but noted that the high cost of the product was affected by a chain of supplies.
He recalled that the current problem started in Nigeria on January 16, 1996, during the regime of late Gen. Sanni Abacha when the pipeline supplying aviation fuel to the airport was shut down.
He said the pipeline may have corroded 26 years after it was shut down by the military for no reason and called on the Federal Government to look into the issue as it would do airlines a lot of good.
He decried that 26 years after the pipeline was shut down, there are now 200 to 300 fuel tankers at the Murtala Muhammed Airport, MMA, Lagos, road claiming to be supplying fuel to the airport, which he said also contributed to the increase in price of aviation fuel in the country. He urged the government to order the Nigeria National Petroleum Corporation, NNPC, to revive the pipeline to put a stop to the current challenge in the industry. Also, the Director, Research, Zenith Travels, Mr. Olumide Ohunayo, said that airlines in the country needed to develop an initiative on the issue and pass such to the Federal Government.
He insisted that the solution to the increase in the price of the product did not lie with the government only, but with all stakeholders involved in the lifting, distribution and purchase of the product. He said, “I do not think the solutions lie with government alone, the airlines need to push initiatives to government such initiative should break the present oligopoly otherwise cloned as deregulations.
I also expect the airlines to introduce some of the operational strategies used by airlines world over to reduce fuel cost.
“These policies and initiatives are numerous; some involve the use of software while others are in conjunction with other service providers.” He called for the consolidation of the industry as quickly as possible, stressing that a regulatory process should be initiated. Besides, the Executive Director, Technical Services, Med- View Airline, Engr. Lookman Animashaun decried that despite the recent crash of the price of crude oil in the global market, the domestic operators still purchase a litre of fuel at a vry high rate in the country. He hinted that in Saudi Arabia for instance, the price of their aviation fuel was determined by the price of the crude oil in the international market and wondered why such could not be replicated in Nigeria. He specifically said that in Saudi Arabia, domestic operators still buy a litre of fuel at 20 cent while the product is being sold for foreign carriers at 41 cent per litre, positing that as oil producing nation, could take a cue from this.
He said, “The major problem that we have in the industry as operators is the amount of money we are paying for fuel per litre. The government should come in and see what they can do to reduce this for us. 45 to 50 per cent of our operations go into fueling. “For example, in Saudi Arabia, their local carriers are paying 20 cent per litre while we are paying N120 per litre in Nigeria. It is obvious that there is a lot of differences. So, government can come in to at least assist us in this area.
“In Saudi Arabia, theirs is good because as the market changes, the amount of money they pay per litre too changes while it has been stagnant in Nigeria over the years despite the fall in the price of crude oil globally. But as foreign carriers operating into Saudi, we pay 41 cent.
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