Domestic airlines in the country are facing numerous challenges in the operation of their business. This is in addition to other challenges that the domestic operators have been facing, which ranges from lack of infrastructure, high cost of spare parts, high airport charges among others.But the most challenging of all the challenges is the high cost of aviation fuel, which has skyrocketed from about N85 and above to N165 litre depending on the volume and the oil marketer the airline is buying from. But as the price of this commodity continues to rise with no end in sight, airlines are crying out loud, as the price per litre is getting beyond their reach. No thanks to oil marketers, who have decided to sell its product on cash and carry basis.
Initially, airline operators had thought that the price would drop, but after several entities to oil marketers to see reasons why they should reduce the price of JET-A1 failed, they decided to cry out. Apart from the fact that a litre of aviation fuel is now sold for between N165 to N170, depending on the volume, the issue is further compounded by the alleged indebtedness of airline operators to oil marketers.
This according to aviation sources has led to a situation where marketers now sell their product on cash and carry basis. The effect of this is that airlines now delay and cancel flights to the detriment of their passengers, who are not aware of what is going on between airline operators and oil marketers. These passengers while the delays last are often told they were delayed for ‘operational reasons’, which is far from the route.
Presently, the high cost of aviation fuel is having its multiplier effect, as airline operators have now decided to quietly pass the burden on the passengers by increasing airfare. The issue has reached a feverish peak that the Nigerian Civil Aviation Authority (NCAA) has agreed to meet the oil marketers to see how to resolve the issue.
According to the General Manger, Safety Management System(SMS), FirstNation Airways, Capt. Tunde Adekoya, while speaking on the topic, “Nigerian Airlines Challenges and Solution :Impact of Jet Fuel Pricing on Airline Economics” said that, “In Nigeria it is often said that we import what we have and export what we don’t have”
He said that though Nigeria has crude oil and do produce Jet A1 at least from Alesa Eleme ,Port Harcourt refinery, it is abysmal in quantity to meet our huge consumption and that has led to a situation where the country has to resort to importing what it has rather than embark on strategies to improve and increase local production.
The FirstNation GM said that this is more so that in the face of lowering global price of crude oil per barrel, our own Jet -A1 fuel price is ever rising.
He added that a sneak preview of Jet A1 pricing mechanism in Nigeria revealed that the following are what oil marketers used to determine their price; landing cost at port, port handling charges, bridging charges (pipeline + trucks),Joint Users Hydrant (JUHU) charges, aviation fuel surcharge paid to the Federal Airports Authority of Nigeria(FAAN) and Value Added Tax(VAT).
Adekoya recalled that up till the early 90’s, Nigeria was a popular destination for fuelling stops because of the competitive price of Jet A1but that today Nigeria has the most expensive price amongst oil producing nations.
“In fact, some non oil producing countries even in our sub-region are selling cheaper than Nigeria” he said
The seriousness of the issue has the Airline Operators of Nigeria (AON) to call on the Federal Government to put an end to the arbitrary increase in the price of aviation fuel by oil marketers to safeguard the interest of the flying public, airlines and the aviation industry.
Chairman of AON, Dr Steve Mahonwu while speaking to journalists on the issue appealed to the Federal Government to put an end to what he described as the exploitative attitude of the aviation oil marketers.
He alleged that oil marketers are in the habit of always increasing the pump price of the product at will, adding that the sky-rocketing price of aviation fuel has made the cost of operating airline business very expensive in the country.
According to him, “Aviation fuel price has sky-rocketed so much that our members are finding it difficult to cope with the price. This is unacceptable! The Consumer Protection Council (CPC) should address the issue of fuel marketers rather than be blaming the airlines for increases in airfare. We are not fighting ourselves, but are striving for equity, success and unity in diversity.”
He argued that there is a limit to how much a passenger can be charged to maintain patronage, adding that safety of passengers is of great concern to airlines.
On his part, the Director General of NCAA, Dr Harold Demuren, condemned the price of the aviation fuel in the country, adding that it is too high for airline operators.
He said that the price is to exorbitant and that stakeholders must look for a way of addressing the issue, adding that the cash and carry style adopted by oil marketers to sell their product is not the best.
According to Demuren, “On fuel, on cash and carry, the fact is that it is not all the fuel marketers that does business in cash and carry, not to all of them, there are some cases and in fact we have summoned the fuel marketers here, we are still on it. The price of aviation fuel is ridiculous in Nigeria, it is too high, and we need to knock this down”.
The NCAA director general said that the agency is working on how to reduce the price adding that Nigeria aviation sector cannot continue with this skyrocketing price.
“We are working on this and I believe that we will be able to do this and so we can’t continue this way. We are now in April going to May .Back in October, November and if my records are correct aviation fuel was sold for about N80, now it is N160 per litre of aviation fuel” he said
He further argued that the marketers cannot continue to sell at that price, adding that since airlines have not doubled the price of their tickets while air fare continues to increase.
He said that the Federal government is doing a lot to refines fuel in Nigeria, adding aviation fuel is just a high quality of kerosene, which the Nigeria refined in the past and that the agency is talking with government but that it has held two meetings with oil marketers.
In his words, “We have been doing this before in Nigeria and there are lot loopholes that we are trying to close right now. We are talking to the government; we have held two meetings with the fuel marketers”
The director who was very concerned and worried about the development said that that the agency will be engaging the oil marketers in another round of talks on how to reduce the price of aviation fuel, promising to let the world know the steps the NCAA is taken.
In his words, “The third one will be a major one because everybody will be present, I will brief you after that, so that is what we are doing, if we are able to lower the operating cost of fuel and that is just the way to go, we must continue to do that”
Already, some airlines have reportedly increased their fares from N18, 000, N20, 000 to N23, 000, N24, 000. The increase Daily Independent learnt may not be on connected with the advice given by AON for airline operators to adjust their fare to present reality if they must continue to be in business.
Presently, passengers are already feeling the impact of the high cost of aviation fuel in the country Only last week precisely on May 13, 2011, passengers were stranded at birth the Murtala Muhammed Airport Terminal 2 and the General Aviation Terminal(GAT),as Arik Air, Aero and Air Nigeria flights were either cancelled or delayed for hours. Some of the passengers, who had earlier collected boarding passes, were forced to ask for refunds, while others either collected their refund or travel using other airlines.
On the way forward, Adekoya, opined that there is no single cure when confronted by a dilemma such as we have highlighted, adding that a plethora of measures are employed in the hope that this combination therapy will cushion the effect of rising costs and perhaps help the airline break even.
He outlined the steps airlines should take to combat the rising fuel prices, they include; passing on the cost to the customer under any guise such as fuel surcharge, invest in more modern and fuel efficient aircraft.
Adekoya added that viewed against a backdrop of dwindling resources and exorbitant funding, this is a death knell, stressing that the fuel and maintenance savings does not match the initial acquisition costs.
Other measures that airline can use to ameliorate the high cost of aviation fuel are improving the consumption patterns through several fuel saving strategies such as: clean skin surface to reduce friction, weight reductions (excess body paint, fly away kit, passenger service waters, vacuum toilets, catering items, flight control/engine trim to mitigate excessive consumption due to adverse rigging, investment in technology to record on board parameters for measuring aircraft performance and to provide ready information to crew on optimum performance options, reduction in “Reserve Fuel” due to better and highly predicable computerised flight plans and optimised cruise attitudes among others.