Jet Fuel: New prices may spike cost

• Airlines, others cry out

Air travel may further be impacted following the decision of oil marketers to hike jet fuel prices which took effect from January 1, 2024.

Already air fares have risen astronomically by over 150 percent in the last few weeks owing to the situation; a situation that has caused so much pain to air travelers across the country.

Although, jet fuel prices remained stable for nearly a year, at between N880 per litre and, N900 per litre depending on the place of purchase.

In Lagos, Jet fuel will now cost N1,023, while Port Harcourt and Abuja will see prices at N1,053 and N1,063, respectively—an approximate 9.08% rise from October 2023’s N938 in Lagos.

Abuja and Port Harcourt witnessed an 8% surge from N978, and Kano experienced a 7% increase from N993, all occurring within three months.

October 2023 had additional spikes with Lagos prices climbing 5.33% to N988. Abuja and Port Harcourt rose by 5.11% to N1028, and Kano increased by 5.24% to N1043.

November 2023 saw a 1.53% drop in Jet Fuel prices in Abuja and Port Harcourt, while Lagos and Kano remained steady.

December witnessed Jet A1 rising from N938 to N993 in Lagos, a 5.87% hike. In Abuja and Port Harcourt, it increased by 6.28% from N963 to N1023, with no change in Kano.

Despite seemingly small percentage shifts, these impacts resonate significantly within the airline industry.

As fuel prices escalate, airlines are faced with a challenging dilemma: They can either absorb the increased costs, reduce their profit margins, or pass on the additional expenses to passengers, potentially dampening demand and impacting ticket sales.

This delicate balancing act between financial viability and customer satisfaction poses a significant challenge for airline management.

The implications of rising fuel prices extend beyond airlines to encompass the entire aviation ecosystem, including aircraft manufacturers, maintenance providers, and airport operators.

As fuel costs rise, these businesses may face increased pressure to streamline operations, optimise resource allocation, and explore alternative energy solutions to remain competitive and resilient in the face of these economic pressures.

In addition to the direct impact on operating costs, rising fuel prices can also indirectly affect aviation businesses through various channels. For instance, higher fuel costs can contribute to increased insurance premiums, as insurers factor in the elevated risk associated with more expensive fuel-related incidents.

Additionally, rising fuel prices can impact the aviation industry’s ability to invest in new technologies and infrastructure, potentially hindering innovation and slowing the pace of progress.

The Chief Executive Officer of aviation consultancy firm, Belujane Konzult, Chris Aligbe, noted that a low-cost air ticket was achievable in the country, in the face of the challenges the airlines were struggling with.

According to him, there was no way airlines could be profitable by charging fees that could barely make them survive in the face of the skyrocketing price of aviation fuel otherwise and forex scarcity.

Aligbe, while speaking to Aviation Metric said, “Our airlines cannot offer low fares. They are not low-fare carriers; their business plans do not fit into low-fare situations. Low-fare carriers are for different business strategies and plans. It includes even the type of airplanes used and a lot of other things. The business plans of existing carriers are not geared toward low fares. They cannot be low-fare carriers.

The Chief Operating Officer of United Nigeria Airlines, Osita Okonkwo, while speaking with the media recently explained that after deducting the cost of fuel and charges to various aviation agencies like the Federal Airports Authority of Nigeria, the Nigerian Airspace Management and the Nigerian Civil Aviation Authority, what remained was too small to sustain their operations.

He further stated that forex scarcity and the high cost of aircraft maintenance were some of the issues the operators were facing. He said it would not be out of place if the government assisted airlines to keep them afloat.

Wole Shadare