Indications have emerged revealing that some domestic airlines may cease operations over the rising price of aviation fuel, otherwise known as Jet A1.
Given that there has been a sustained increase in the price of aviation fuel over the last two years, airlines have been forced to enhance their operations by raising ticket prices.
In less than eight months, specifically between July 2023 and February 2024, the product's swinging price saw local carriers struggle with 109 per cent price increment.
The 12 scheduled airlines in the country, including Air Peace, Aero Contractors, Arik Air, Max Air, Azman, Dana Air, Ibom Air, Green Africa, Overland, Rano Air, ValueJet and United Nigeria Airlines, UNA, had made efforts to stay in business, even as the price of jet fuel surged from N629 to N1,316.
With the situation no longer sustainable, some airlines are looking at discontinuing operations, Vanguard has gathered.
Fluctuations
Although efforts to get the price of jet fuel as of press time failed, Chief Operating Officer of Ibom Air, Mr George Uriesi, told Vanguard that it was fluctuating between N1,300 and N1,500.
Uriesi said: "It is a massive challenge because fuel is the major cost. In two years, it has gone from about N200 to N1,500. No matter how prudent an airline is, it cannot absorb that kind of increase in the major cost input. The increase is so massive that it is difficult to attack by raising fares. We think that we have reached the plateau in terms of using fares to absorb all these inflationary issues - the value of naira and increase in price of fuel, which are the two most important components for a domestic airline.
Reached the zenith
"I think we have reached the zenith of how much we can charge higher for people to travel without stopping them from buying tickets. What I can say right now is that the recent strengthening of the Naira was just like an oxygen mask for the domestic airlines because it had reached the point where it was no longer sustainable. I don't think any other group of airlines in the world faces the challenges that Nigerian airlines face."
Refining
Managing Director of Aero Contractors, Captain Ado Sanusi, in a chat with Vanguard, also warned that if the country does not start refining Jet A1, the situation might worsen.
He said: "Cost has been skyrocketing and from the normal 35 to 40 per cent of airlines' cost, it has now jumped to close to 80 per cent. And in some cases, 90 to 95 per cent. It means when tickets are sold, 90 per cent of the ticket goes to buying Jet A1. It's a direct relationship. When the price increases, cost increases.
"Airlines increase the prices of their tickets and transfer the cost to the customer. Until we start refining jet fuel in the country, we will depend on imports. While we are depending on import, we are looking at the cost with a naira to dollar exchange rate. I don't know whether Dangote and Port Harcourt refineries are equipped to refine Jet A1, but even if they are, it would take a little bit of time before we feel the impact."
Cartel
While calling on Federal Government to make importation of jet fuel transparent, Sanusi said: "If the federal government can make the importation as transparent as possible, I think it will give the airlines a picture of what the price will be. If the price can be published by the Department of Petroleum Resources, DPR, we will know the price and that there is no cartel fixing the price. If they do that, I think it would stabilize the price because right now, some airlines are struggling and some will continue to struggle until they struggle no more and then give up."
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