Some Nigerian airlines have said if the price of aviation fuel continues to stay at the present average price of N140 per litre in the next two weeks they would stop operation and ground their fleet.
The airlines told THISDAY that the market has depleted by about 50 percent from last year and further increase in fares to reflect the high price of aviation fuel may reduce passenger traffic to less than 40 percent.
This means that the load factor would be drastically reduced and every flight would operate at a loss and cumulatively the airlines would lose huge sums that would eventually ground their operations with huge debts.
Although the aviation fuel market is deregulated but the airlines are calling for government intervention, saying that government must have to come in and stop this slide as they accused oil marketers of insincerity in the pricing of the product, known as Jet A1.
An operator told THISDAY on Monday that the increase in the price of aviation fuel started in the first week of June, 2016 and that the product that was selling for N115 per litre rose to between N139 to N142 per litre, depending on the city the airline is buying the product.
The operator said that most airlines are disinclined to increasing prices but realistically, without increase in prices inevitably the airlines would be recording huge losses.
“The way out is not increasing prices because if you increase prices you price yourself out of the market. The number of people who travel by air has drastically reduced and most of them cannot afford an increase in fares. Besides, some airlines would want to hold back fare increase to capture the passengers that would shun the high fares in other airlines,” he said.
But a senior executive of another Nigerian carrier who spoke to THISDAY on Wednesday said the increase in fares has become inevitable because that is the way the airline could ensure operation; otherwise it would ground its service.
“We don’t really know how to manage this. We are yet to take decision in the management but we have to increase price; although we have not yet decided to do so. I will speak to other airlines to know their thinking about this. If we don’t increase price we operate at a loss.
“It is surprising that after they said subsidy has been removed, the product price went up again. One understands that the product is important and I know what is happening to Naira in the exchange market but this is getting too much. Everything is going up, maintenance, training, everything. People should gird their loins because they should be ready to pay more to travel; not only by air but also by other means,” the official said.
At the best of times domestic airlines and charter operators demand over two million litres of aviation fuel daily.
Although the product is deregulated but THISDAY learnt that the marketers operate as a cartel and instead of them importing the product so that every market would sell its own product, which would create competition and make the product available, they usually assign one marketer or two to import for a period.
This makes the supply inadequate and unable to meet the demand, which makes the prices to soar, but because the product is imported it is subjected to the high exchange rate and demurrage and other expenses are incurred to bring the product to the airports.
However, the federal government is seriously considering dedicating one of the refineries to the production of aviation fuel after the repairs. But that is for long-term projection; for now, the product, which constitutes about 50 percent of airline’s operation cost may impair air operation in Nigeria.
THISDAY
