JET-A1 SURGE: We’re bleeding, losses may soon be unsustainable – Airline Operators of Nigeria

…challenges FCCPC sanctions

By Dickson Omobola

Airline Operators of Nigeria, AON, Friday, lamented the spike in the price of Jet-A1, otherwise known as aviation fuel, saying domestic carriers are bleeding financially.

AON said the price of aviation fuel, which was around N1,000 per litre two weeks ago, has risen to around N1,800 per litre in many locations, representing roughly an 80 per cent increase within a short period.

Aviation fuel is the single highest component of airline operations, accounting for about 30 to 35 per cent of total operational costs. Due to the recent conflict in the Middle East, the product has experienced a price spike.

Meanwhile, Spokesperson for the AON, Professor Obiora Okonkwo, said the surge has put airlines under financial pressure, especially as most carriers have chosen not to immediately transfer the additional costs to passengers.

However, Okonkwo warned that if the situation persists and government is unable to intervene, domestic carriers would no longer be able to absorb the losses.

Speaking on Channels TV, the Chairman of United Nigeria Airlines, said: “Two weeks ago, we were getting Jet-A1 at about N1,000 a litre, which today is about N1,800, and even more in some stations. We have experienced an increase of about 80 per cent. That’s quite a spike. We are watching the situation in the Gulf area, and we see will continue to see what happens. We are not in a business where you can easily adjust your ticket price. Right now, what we are doing is that we are bleeding. We are taking the blow. We are selling tickets at very non-profitable price. We are losing a lot of money.

“We just pray it would not be for long. Obviously, adjustments will be expected anytime soon. But again, we are very sensitive to the economic situation of Nigerians and our travellers.

“The recent release of reserve crude oil will have an impact in the market. But if it does not, we are expecting that government should engage Dangote refineries. We were more hopeless in a situation where there was no refinery in Nigeria. That was last two years. We are very hopeful that we can find a solution around it.

“I am hoping that it will not last beyond this, but if it does, I can tell you that maybe many airlines may not be able to absorb the losses that are associated with the development.”

On the Federal Competition and Consumer Protection Commission, FCCPC, decision to sanction about five airlines over what it termed guilty of colluding to fix prices, he said: “There’s no doubt that they have authority to do certain jobs. But as regards aviation, we are watching. The last time they said they would give the details, we haven’t seen the details.

“I have always maintained that this is a deregulated sector. There is no meeting of airlines where they agreed to fix prices. Fixing price is out of it, because that would be a cartel. You need to have a proper understanding of the economy of aviation before you can actually get to the root of the price and cost.

“I really doubt that there is anything to worry about. We don’t do that. AON, as a party, understands the implication of that. Because you see, different aircraft attract different operational costs. And each airline is supposed to work out their race based on their own operational cost.

“Besides, one of the critical factors of even retaining your operating licence is that at every point in time, you must prove to the regulators that you are financially viable. You must have to make a profit. I pray that they (FCCPC) understands that this sector is very vulnerable, and they will not have to do anything to diminish the industry’s reputation or just put the operators on a loggerhead with the loyal passengers.”

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