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As there seems to be no solution to the skyrocketing price of aviation fuel otherwise known as Jet A1, WOLE SHADARE x-rays some of the challenges that have contributed to the unabated rising costs of the commodity in Nigeria
Since January 2021, the price of Jet A1 has been skyrocketing to the chagrin of airline operators. At the beginning of the year, the commodity sold for between N190 and N200 per litre. A litre of aviation fuel in the domestic scene currently goes for as high as N305 and N315 per litre, depending on the airport airline is buying from.
Many airlines have been voicing concerns about the impact of rising fuel costs – airlines’ largest operating cost item – on their financial recovery. Fourth-quarter 2021, according to forecast, tends to be a seasonally weaker quarter for airline passenger revenue as the fuel price increase represents an unwelcomed challenge.
Reliance on others
The country now relies heavily on foreign nations for the supply of these fuels. The country spends a substantial part of its foreign exchange on fuel importation. Nigeria is a petroleum-producing and exporting country.
But like Libya, She is dependent on foreign nations for her liquid transportation fuels (mostly gasoline and diesel) produced via petroleum refining.
Nations all over the world depend largely on refined petroleum products to meet their transportation energy requirements. Gasoline, diesel, and aviation kerosene are the most common fuels used in the transportation sector. The increasing industrialisation, globalization, and motorisation of the world have led to a steep increase in the demand for fossil fuels especially petroleum.
Crude oil rise, impact on passengers
This is not also helped by the astronomic increase in the price of crude oil, which oscillates between $80 and $82 per barrel. Each time the price of crude oil goes up, airlines are usually the first to feel the impact as aviation fuel price hits the rooftop.
To cushion the effect, airlines pass the cost to passengers by raising the cost of air tickets. The operators are in a dilemma as to the propriety of further raising fares, which could see a drop in passenger traffic as luxury buses are giving airline owners a run for their money amid glaring insecurity across the country.
Many of the operators charge below $100 (N55,000) if travellers buy their tickets well ahead of their travel date. But for tickets close to the date of travel, passengers can pay between N45,000 and N50,000 on Economy class, depending on the carrier.
Average monthly jet fuel price and Brent crude oil price continue to climb higher in recent weeks and are currently well above pre-crisis 2019 levels. At the beginning of November, the price per barrel of jet fuel was at $96.1, +70 percent year-to-date.
But the infrastructure for quick dispensation of fuel from the refineries or fuel depots is lacking; a situation that may have added to the cost of the product.
Except for the Federal Government urgently repairing the broken down pipelines linking the Atlas Cove to the airports, particularly the Murtala Muhammed Airport, Lagos, the aviation fuel crisis would continue to persist.
The pipelines ruptured in 1992 and since then, aviation fuel, otherwise known as Jet A1 is brought to the airports in tankers that in most cases have reduced the quality of the product.
The hydrant pipes from Atlas Cove have not worked for 20 years. Can you imagine trucking Jet A1 to an airport like Johannesburg?
The Federal Airports Authority of Nigeria (FAAN) needs to work on infrastructure at the airports. Aviation security expert, Group Capt. John Ojikutu (Rtd), has charged NCAA to draw up standards for Jet-A1 quality assurance, starting with the transportation vehicles type or profile; supply and trucking systems; storage and dispensing systems.
He stated that at the moment, vehicles supplying aviation fuel, otherwise known as Jet-A1 are not sufficiently distinct from those supplying other petroleum products.
Director of Engineering, Ibom Air, Lookman Animashaun, told Aviation Metric that the price of aviation fuel in Nigeria had been on the rise since January, explaining that in January this year, the commodity sold for N200 per litre.
He disclosed that the commodity was sold for N310 per liter as of last week Monday, a 60 percent increase in a space of eleven months. His words: “Aviation fuel price keeps rising every month in Nigeria. It is never stable.
We started with N200 per litre, but as of today, it went up to N310 per litre. “The average cost of an air ticket should be nothing less than $100, but if you look at the situation, no airline charges that, except when you do a late booking.”
Animashaun lamented that whenever oil prices go down in Nigeria, prices of commodities, tickets do not reflect in the reduction of oil, unlike in Europe and the United States where ticket prices go down whenever prices of crude oil go down.
He explained that international carriers do not feel the impact of skyrocketing JET A1 in Nigeria because the carriers carry enough fuel on their journey to the country and only top it up when necessary.
The International Air Transport Association (IATA) in its Airlines Financial Monitor made available to Aviation Metric noted that the price increase has been driven by swiftly recovering demand as markets reopen around the world and economic activity restarts.
Meanwhile, supply has remained tight since an increase in OPEC+ production has been slow, while many airlines have been voicing concerns about the impact of rising fuel costs – airlines’ largest operating cost item – on their financial recovery.
General Manager, TotalEnergies Nigeria, Rabiu Abdulmutallab, in his presentation at a conference in Lagos recently, said that unless the challenges of continuous importation of Jet A1, the inability of airline operators to have easy access to foreign exchange and airport taxes among others are resolved, the skyrocketing price of the product in Nigeria would continue to rise in the country.
To address the current situation, Abdulmutallab canvassed proper coordination among relevant government agencies in monitoring and enforcement of all standards along the supply chain.
To avoid contamination of the product, Abdulmutallab opined that organisations should not compromise any of the established international and local regulations on handling JET A1 from refinery to aircraft, adherence to international specification checklist for aviation fuel recognised by major aviation fuel suppliers in the world, and checking competencies and capacities of laboratories contracted for testing parameters of the product in the country.
He also appealed for government intervention for easy access to Forex especially aviation fuel importers and national sensitisation and awareness on monitoring filtration phase out from all aviation handling systems in Nigeria before the deadline of July 2023.
Until most of these challenges are taken off, airlines would continue to see a steady rise in the price of the commodity, while travelers would see the cost passed onto them.