jet-fuel-1With airline operators still battling to cut costs and stay afloat in the face of rising prices of aviation fuel and operations, air passengers have every reason to worry over likely hike in air fares as the peak travel season draws near.

The rising price of aviation fuel is taking its toll on airlines as operators say they now spend millions of naira sourcing for the commodity which accounts for over 40 to 45 percent of the cost of their operations.

At least on a daily basis, an airline spends millions of naira on fuel consumption. Arik Air Chairman, Joseph Arumemi-Johnson Ikhide recently disclosed that with 126 flights daily, the airline needs about 500,000 litres a day and 3.5 million litres a week to power its flights. He said some marketers either deny them fuel or can’t even supply them with what they want, compelling  them to adjust their flights.  At N180 per litre, he said the airline may spend about N90 million to power all its flights in a day.

Akpan Amos, Chief Executive Officer of Capital Airlines agreed that fuel accounts for about 45 percent of the cost of operating an hour’s flight in Nigeria. According to him, the airlines charge about N800 per ticket as fuel surcharge and Boeing 737 burns about 3,500 litres of fuel from Lagos to Abuja costing about N180 per litre.

Similarly, Managing Director, Med View Airlines, Mr. Munir Bankole decried this situation when he called on the Federal Government to intervene and remedy the scarcity and high cost of aviation fuel in the country. He remarked that the paucity of aviation fuel and the attendant high cost is the major challenge airlines grapple with.

Head, Corporate Communication, Dana Air, Mr. Tony Usidamen voiced the same problem recently when he said  a lot of factors like aviation fuel were impacting negatively on the operations of domestic operators in the industry, coupled with the lack of a maintenance repair and overhaul (MRO) facility in the country.

An analysis shows that presently aviation fuel is sold at about N175 to N185 and even N195 per litre, a rate which is more than $1.00. The same product is sold at a cheaper price in the US; in China it is $0.85 and at similar rate in the Middle East countries where oil is produced and refined. Operators argue that as the sixth largest oil-producing country in the world, Nigeria should be selling Jet A1 at about N95, which is about $0.60 cents, which is the price sold in many oil producing countries.

The reason for the outrageously high price and often times scarcity of the product is unclear but operators have always passed the buck to government and more importantly oil marketers for hoarding the product to create artificial scarcity and maintain monopoly. On the side of the government, for showing less commitment in subsidising the imported product or initiating the refining of the product locally.

A top official of a domestic carrier, who would not want his name mentioned, said his airline was looking at how to jerk up airfares without necessarily scaring passengers away. “It is a big challenge for us, the way forward is really to increase airfares, which we must do if we must remain in business.”

As a way of averting this impending hike in air fares, airline operators under the aegis of Airline Operators of Nigeria (AON) recently gave conditions. The operators had demanded among other things, the regular supply and reduction in the price of aviation fuel, otherwise known as JET A1 and the removal of value added tax (VAT). The operators noted that the VAT was not applicable to other modes of transportation in Nigeria, just as they equally canvassed the removal of rent payable at the airports.

Assistant General Secretary, Airline Operators of Nigeria, Alhaji Muhammed Tukur, also said the association was planning to advise members to reach a consensus on a little increase they would make on their airfares.

If the threat by airline operators is anything to by, passengers would have to adjust their pockets, as Isyaku Rabiu, chairman of IRS Airlines agree it is glaring that the travelling public will be on the receiving end of the whole situation.

Already, passengers in India are now feeling the heat as one of its major airlines, Jet Airways early this month followed its smaller rival, SpiceJet to hike air fares by a steep 25 per cent to mitigate the impact of a near 15 per cent spike in oil prices of late. According to travel agents and tour operators in Mumbai, high traffic sectors, such as Mumbai-Delhi, Delhi-Bangalore and Mumbai-Bangalore are seeing the maximum increase in fares now that demand has increased in the peak travel season (October-December).

Recently in China, the upward adjustment in fuel price has driven up airline costs  as airlines including Air China , China Eastern Airlines and China Southern Airlines say they now spend over 40% of their total costs on jet fuel, a consequence of which was a hike by as much as 15-20 percent in air fares.

As a way of curtailing this probable increase in air fares which, according Mr. Henry Asonye, a frequent air traveler, will greatly affect the greater number of the travelling Nigerian public, outside making aviation fuel accessible and affordable for operators, government in the long term should facilitate a system where aircraft spare parts should be made available in the country and there should be maintenance, repair and overhaul (MRO) facility.

Giving support to the clamour to bring down the cost of aviation fuel to domestic airline operators, 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 as a possible solution.

 

Information from Daily Trust was used in this report.

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