Some Nigerian airlines are in imminent danger of going under if the hike in the prices of aviation fuel persists, THISDAY checks has revealed.
As at Wednesday evening, aviation fuel price ranged from about N2, 690 per litre in Lagos, N2,750 in Asaba, N2,759 in Port Harcourt, N2, 990 in Kano with indications that it may rise to N3, 000 by today.
The Managing Director and CEO of Aero Contractors, Captain Ado Sanusi, told THISDAY in a telephone interview on Wednesday that if nothing is done to check the price of aviation fuel, known as Jet A1, some airlines would inevitably stop flight operations.
He said that airlines have not reflected the increase in the cost of ticket because it would become unbearable for travellers who are already grappling with the high cost of airfares occasioned by the devaluation of the naira and inflation.
It was learnt that the airlines may not have any choice but inexorably increase fares because they cannot continue to bear the cost of the increase, which they described as arbitrary.
THISDAY gathered that some airlines operating wet leased aircraft increased fares but passengers shunned their services; so, they had to lower their fares to ensure patronage and probably operating at a loss.
Captain Sanusi admitted that increasing fares would be fraught with challenges, “because this is low season; so, airlines should push for government intervention to reduce the cost of aviation fuel instead of passing the high cost to the beleaguered passengers.”
He argued that global crude price has increased by 30 per cent but aviation fuel price in Nigeria increased by 50 per cent.
Before the recent increase, the cost of aviation fuel used to be cheaper than what obtained in the United States, but now Nigerian airlines pay more for fuel than the US.
Sanusi lamented that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has not stepped in to check the outrageous spike in the price of the product, insisting that the aviation industry is not having transparent pricing of Jet A1.
He alleged that the agency given the responsibility of monitoring and regulating these prices is not doing its work.
“We cannot operate outside the aviation ecosystem. The price of aviation fuel in Nigeria has recorded the highest increase since the Iran war started. Government ought to intervene; not that it will fix the price but ensure it operates at a certain range. If there is 30 per cent increase in the cost of crude and you increase your price by 40 per cent, adding taxes, cost of transport, levies, then you put your profit, it will get to the range of about 40 per cent. The price should not differ from what is obtained from the international market. That will mean that the pricing is not fair.
“Now, they are pushing some airlines to go out of business, but some marketers will also go out of business. The regulatory agency should step in. There must be transparent pricing. We now have refinery in the country. What we are dealing with now is the price of crude oil, not the logistics of freighting, demurrage charges and other logistics cost of importation, so we should expect legitimate pricing of the product. Airlines are being forced out of business and everyone is keeping quiet, including the regulatory agency. It is unfortunate,” Sanusi said.
Inside source in Air Peace who confirmed what Sanusi said, disclosed that the airline, which is the biggest operator in the country, has been purchasing aviation fuel from prices ranging from N2500 to N3000 and expressed worry that the price may increase in the coming days.
Airline Operators of Nigeria (AON) sources said the body cannot continue to take the losses anymore and has concluded plans to announce increase in the cost of airfares.
“AON will make the announcement soon, domestic airlines cannot continue to bear these losses; otherwise some airlines may go under,” an insider told THISDAY.
On whether the increase will not further deplete the existing passenger traffic, the source said it would not because the segment of the population that travel by air can absorb such increase.
THISDAY also spoke to an executive of one of the major aviation fuel marketing companies in Nigeria who wished to remain anonymous. He said that the price of aviation fuel may still go up again before it would come down.
He explained that the price of the product is high because marketers estimate that the price may increase when they want to purchase another stock; “so, they sell the product at the price that will guarantee their replacement cost. This will enable them to have the money to buy more when their stock is exhausted.”
The senior official also said that the price Dangote Refinery offers the product is high; “so, some of the marketers decided not to buy from Dangote but to buy from an importer who may have imported the product sometime in the past. But now, the marketers did not have any choice but to patronize Dangote when the current stock is sold out.”
He also said that airlines may not have any choice than to increase prices because they cannot continue to bear the cost of aviation fuel.
“If they spread the cost it will be just an increase of N7000 on each ticket. It will not add much to the fare but it will be enough to safe the airlines. The people who suffer in Nigeria are the people of lower class, such increase will not affect those who travel by air,” he said.
The marketer also projected that the price of Jet A1 will still increase before it will finally come down and estimated that by the end of the next two months, the prices will come back to what it was before the Iran war. The price of aviation fuel was N900 per litre before the increases occasioned by the war.
“The war is not ending soon as originally contemplated. Price of aviation fuel will eventually come down, but it may go up a bit before it will come down; may be, in the next two months. Dangote was selling N2, 500 per litre; then N2, 600, but some say it has gone up to N2, 700. You have to note that people are not bothered about the cost of aviation fuel. If it is premium motor spirit (petrol), you have to consider possible massive protest, the labour unions, but nobody bothers about the increase in the price of aviation fuel,” he said.
As at March 25, 2926, the average cost of one-hour, one-way flight ticket in Nigeria ranges from N195, 000 to over N250, 000.
