Domestic airlines spend N32bn annually on aviation fuel

Arik16 September 2013, Lagos – Nigeria’s domestic carriers spend about N32 billion annually on aviation fuel, known as Jet A1, with Arik Air spending about N1.9 billion monthly (N22.8 billion annually) and the rest on scheduled flight spending over N800 million (N9.6 billion annually), which constitute over 30 per cent of each airline’s operational cost.

For many years airlines have complained about the high cost of aviation fuel in the country when the prices were outrageously high as oil marketers allegedly hoard the product to create artificial scarcity, but recently it has been confirmed that the price of the product per litre does not differ from its price in the international market.

Fuel is sold at about N175.00 to N185.00 per litre, which is more than $1.00 but the product is cheaper like in the US and the Middle East countries where oil is produced and refined. So airline operators argue that as the 6th oil-producing country in the world, Nigeria should be selling Jet A1 about N95, which is about $0.60 cents, which is the price it is sold in many oil producing countries.

The cost of fuel is a menace to the coffers of the airlines and combined with other charges and cost of aircraft maintenance, some airlines are bereft of operational funds few years after they have started operation.

Before now, oil marketers in charge of supplying aviation fuel to airlines had been variously accused of hoarding the product, ganging up to whittle competition, thereby selling the product as pseudo monopolies.

The Chief Executive Officer of Capital Airlines, Amos Akpna, recently said the cost of aviation fuel in Nigeria was very high and called on the government to find ways to bring down the prices.

“The airline charges about N800 per ticket as fuel surcharge. A Boeing 737 burns about 3,500 litres from Lagos to Abuja, costing about N180 per litre. Currently, fuel accounts for 45 per cent of the cost of operating an hour’s flight in Nigeria. Next time you board an aircraft from Abuja to Lagos clock when the engines starts and when the engines are turned off. It will be a minimum of 1 hour 15 minutes or 75 minutes. Calculate the fuel cost for that trip yourself,” he said.

Giving support to the clamour to bring down the cost of aviation fuel to domestic airline operators, the Marketing Manager of Dana Air, Obi Mbanuzo, said the high cost of aviation fuel would always keep air fares high and urged government to push for the refining of the product locally.

“Aviation fuel is about 30 to 40 per cent of our operational cost, so the cheaper the fuel price the lower our operational cost. This is why we are happy with the contract signed last week by Dangote to build refinery in the country because we believe local refining capacity will reduce the cost.”

Speaking in the same vein, the Managing Director of IRS Airlines has recently observed, “The pricing mechanism for Jet A1 has been stripped of all government subsidies as against all other commonly used fuels. This has resulted in a very high and very erratic cost of Jet Fuel.”

Many in the industry posit that government sees air travel as elitist and therefore liberalised the pricing of aviation fuel and that is what has always kept the product’s prices high in the country and with such prices many Nigerians cannot afford to travel by air which means that the sector would not grow to contribute to the nation’s GDP.

– This Day

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