Airfares brace for new highs after 100% increase in February
By Jeph Ajobaju, Chief Copy Editor
Aviation fuel is edging towards N700 per litre, and it will further raise airfares which leapt 100 per cent in February, with a one-way ticket from Lagos and Abuja costing an average N50,000 upon the rise in aviation fuel to N450 per litre.
Muhammadu Buhari, Nigeria’s aloof and irresponsible President, last month let it be known through the Federal Competition and Consumer Protection Commission (FCCPC) that the increase in airfares was coordinated and should be reversed.
Federal lawmakers, another gang of self-serving public officials stealing from the treasury, have also asked local airlines to stop raising fares.
The reality, however, is that aviation is capital intensive. Apart from high maintenance costs in dollars, aircraft consume expensive aviation fuel which is also imported in dollars, with the price gyrating with naira exchange rate.
Neither the lazy Buhari who is currently on another medical tourism in London, nor shameless treasury looters who call themselves lawmakers can brown beat airlines to reduce fares by fiat while aviation fuel and other costs are soaring.
Buhari and lawmakers were elected to fix problems. But both Buhari and the National Assembly (NASS) have conspired to run Nigeria aground by their actions and inactions.
They are also wasting and stealing with impunity money meant to improve all sectors of the economy, including aviation, to rein in disruptions and rising costs.
None of the national four refineries is functioning, despite billions of naira being voted for their turn around maintenance (TAM) every year. Local refining would ensure cheaper petrol for cars and aviation fuel for aircraft.
But Buhari does not care. Nor lawmakers who should hold him accountable.
So, the price of aviation fuel rose 35 per cent from N430 per litre to N580 on Tuesday and 24 hours later oil marketers predicted the price would notch up to N700 by 19 March if global crude oil prices continue to rise.
Aviation fuel, also known as Jet A1, which sold for N190/litre and later N360/litre in January, rose to between N410 and N450 in February.
On Tuesday, it rose to between N579 and N607.
Independent Petroleum Marketers Association of Nigeria (IPMAN) National Operations Controller Mike Osatuyi warned that Russia’s war in Ukraine and related factors may further raise the prices of aviation fuel and other petroleum products.
Oil marketers and airport officials said aviation fuel sells at different prices across the country.
It sold for N579 per litre on Tuesday in Lagos; Abuja (N599), Port Harcourt (N599), and Kano (N607).
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Scarcity triggers price hike
The latest price rise is caused by the scarcity of aviation fuel which forces all airlines to reschedule flights. Those who cannot get Jet A1 cancel flights.
Check-in counters at airports from Lagos and Abuja to others across the country are besieged by stranded passengers.
Below are the views of stakeholders, per reporting by The PUNCH.
George Uriese (Ibom Air Chief Operating Officer)
“The latest increase in Jet A1 price puts domestic carriers in a very tight situation. Something has to give way at this time, which I don’t know
“I feel perhaps airlines may be forced to change their business models if the situation persists.”
Mike Osatuyi (IPMAN National Operations Controller)
“Well, the sharp increase we are seeing in crude price is a correspondingly sharp increase we are also recording in the prices of aviation fuel and other petroleum products.
“Prior to the Ukraine-Russian crisis, over two weeks ago, crude was still around $100 and $105 per barrel.
“But as of today, crude is around $139-$140 per barrel; that is about 40 per cent increase. You can see that on aviation fuel. It went up from about N450/litre to about N570 per litre; that is a huge increase.
“And you have to know this: We buy diesel, kerosene and aviation fuel through the black market. The marketer will also pay for the oil vessel at the black market rate and the exchange rate is also at the black market rate.
“So, you pay cash to people who are bringing in these products. So, the prices of these petroleum products go in line with the price of crude oil. I am sure that by next week, marketers will start bringing in vessels at $140 per barrel.
“So the hike goes hand in hand with the increase in the price of crude oil. By next week, don’t be surprised we are hitting N700.
“The [black market] exchange rate today is N585 while the official rate is N416; and the government does not give forex [foreign exchange] allocation for the purchase of kerosene, diesel and aviation fuel.”
Alexander Nwuba (President, Aircraft Owners and Pilots Association of Nigeria)
“Importers are business people; jet fuel does not fall under subsidy so they have to pass their cost to consumers.
“I only know that they are responding to market conditions, they changed their prices and everything has gone up; diesel is almost closely marking jet fuel. Diesel has gone up and now jet fuel.
“The prices has to go up because it is not subsidised by the government, so whoever that is importing has to recover the cost and make a tiny bit of profit. Subsidy doesn’t cover jet fuel. Nigerians don’t consume jet fuel, they pay for it through airfares.
“Before the hike, airfares constituted about 40 to 50 per cent of airlines’ cost of operations which they pass on to consumers. Now that the price of aviation fuel is almost double, it means that jet fuel now constitutes up to 60 to 70 per cent of the operating cost of airlines.
“You still have other cost increases across the board. Handling charges have gone up at the airports, and a number of other things have gone up.
“Naturally, what happens is that airlines will adjust their prices to the operating cost in order to make a profit and they are still complaining that they are not making profits”
John Ojukutu (Centurion Aviation Security and Safety Consult CEO)
“As of the time we were selling aviation fuel for N200/litre, it was going at about $3-$4 per gallon in the United States; if you translate that, it is about N2,000.
“So, I have been saying that aviation fuel shouldn’t be sold for less than N400 to N500 per litre. We are just facing the reality.
“Have you forgotten that we are importing? We don’t refine it here! If we are refining it here, it would have been a different thing, but we are importing it.”
