Recently, the umbrella body for domestic airlines in the country, Airline Operators of Nigeria (AON), notified air transport passengers that the sector has been hit by a major crisis – an acute scarcity of aviation fuel (Jet A1), which was expected to cause intermittent flight delays and cancellations.
Elsewhere, Aero Contractors, a major domestic airline, has temporarily shut down its passenger flight operations due to the challenging operating environment which has taken a toll on its daily operations. With the rising insecurity involved with the use of other modes of transportation such as roads, the safest option is air transport and movement/business activities will be badly affected if the fuel scarcity persists.
Since the start of the year, the airline operators have complained about the scarcity and rising cost of aviation fuel (which accounts for c.40% of their operational costs), with the attendant impact on cost of operations and conditions of service. As of February, reports indicated that the cost of Jet A1 was above N400/litre, specifically, N410/litre in Lagos, N422/litre in Abuja and Port Harcourt, and N429/litre in Kano from c.N190-N230/litre previously.
Also, in May, the Major Oil Marketers Association of Nigeria (MOMAN) indicated that the price of aviation fuel was N500-N550/litre. Currently, the price of aviation fuel is around N700/litre and without any intervention to provide respite, the woes of the airline operators are far from over.
We recall in May, the House of Representatives alongside the Nigerian National Petroleum Company Limited (NNPC) and Central Bank of Nigeria (CBN) resolved to allow NNPC supply Jet A1 to marketers nominated by the embattled airline operators for three months at a fixed price of N480/litre.
Many airlines have raised air tickets by as much as c.46% between our last survey in February and the current survey in July 2022. For context, based on our findings in February, bookings on Max for a one-way ticket for a trip on Lagos-Abuja route was between N50,000-N53,000 on economy class. Currently, the same route fare is between N70,000 and N84,000 for tomorrow’s (Wednesday) flight trip. Likewise, another airline operator, Arik Air, charged N56,000 for the same route in February. Now, the same destination for tomorrow’s flight trip is N76,333 on economy class.
The aviation sector which just recovered from the pandemic-induced recession is likely to have its interesting prospects punctuated if the aviation fuel crisis persists. Given the systemic importance of air travel for the conduct of trade and other economic activities, immediate actions to address the fuel supply chain disruptions is imperative.
Also, transport via air is considered one of the safest channels considering the despicable level of insecurity bewildering the country. Hence, resolving the continued fuel crisis facing the safest transport channel is the only way out as many passengers/commuters cannot afford to lay at the feet of terrorists/bandits who have taken over major road highways in the country.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
Download Nairametrics App for breaking news and market intelligence.