By Anthony Uche
These are indeed hard times for airline operators in the country as they continue to grapple with the scarcity of aviation fuel, otherwise known as JET A1. Until recently, Nigeria was one of the preferred destinations for refueling because of the nation’s favourably competitive price of aviation fuel. Today the product is more expensive in Nigeria than any other oil producing nation.
Recently, the pump price of JET A1 rose from 170 to 195 Naira per litre. Interestingly, the latest hike is the third in eight months. It would be recalled that the price had gone up from N160 to N165 in August, 2011, and had risen to N170 per litre in January this year.
Consequently, there have been reports of passengers being left stranded at virtually all airports in the country. There were even cases of outright cancellation of flights to the chagrin passengers who had no inkling of the wrangling between airline operators and aviation fuel marketers. The passengers were simply told that flights were being delayed due to operational reasons.
Reacting to the development, the Assistant Secretary General of Airline Operators of Nigeria (AON), Muhammed Tukur, admitted that the recent problems were caused by the shortage and high cost of JET A1. He observed that the problem manifested recently, leading to the rescheduling, and in some cases, outright cancellation of flights. He, however, decried the astronomical increase of JET A1, noting that it is very expensive for flight operators.
The incessant scarcity and high cost of JET A1 remains a source of concern to both airline operators and Nigerian Civil Aviation Authority (NCAA), the regulatory body in charge of the aviation sector. Stakeholders are worried that this may translate to a further hike in airfares, since airline operators must break-even to remain in business.
At a stakeholders meeting held to find lasting solutions to the incessant problems bedeviling the sector, the Secretary General, Airline Operators of Nigeria (AON), Captain Mohammed Joji said that with the development, operators were in a fix on how to raise fares because of the threats posed by road transportation, adding that raising fares could force people to take to the road.
Apart from the fact that a litre of aviation fuel is now sold for N195, the reported indebtedness of airline operators to oil marketers further compounds the issue. This, according to aviation sources, has led to a situation where marketers now sell their product on a ‘cash and carry’ basis.
Obviously, both the marketers and airline operators are now at daggers drawn, because while the airlines claim that JET A1 is very expensive in Nigeria, the marketers are quick to tell anyone who is ready to listen that the airlines buy the product on credit and sometimes fail to redeem their debts.
The Airline Operators of Nigeria (AON) has, therefore, called on the Federal Government to put an end to the arbitrary increase in the price of aviation fuel to safeguard the interest of the flying public, airlines and the aviation industry in general.
Chairman of AON, Dr Steve Mahonwu, while speaking on the issue appealed to the Federal Government to put an end to what he described as the exploitative attitude of the aviation fuel marketers. He alleged that the marketers are in the habit of always increasing the pump price of the product at will, adding that the skyrocketing price of JET A1 has made the cost of operating airlines in the country, very expensive. He argued that there is a limit to how much a passenger can be charged to maintain patronage, adding that safety of passengers is of great concern to airlines.
On his part, the Director General of NCAA, Harold Demuren, has condemned the hike in the price of JET A1 in the country, noting that it is too high for airline operators. He said that stakeholders must look for a way to address the issue, adding that the ‘cash and carry’ style adopted by the marketers is not the best. He also said that the agency is working on how to reduce the price, adding that the aviation sector cannot continue with this skyrocketing price.
The marketers in justifying their actions, claim that they face a lot of challenges include the landing cost of the product. They also claim to spend so much money on high demurrage charged by the Nigerian Port Authority (NPA), increased depot cost at the Apapa Port, increased operational cost, the high cost of charges levied on them by the Federal Airports Authority of Nigeria (FAAN) and other charges they incur in the course of doing business.
It is noteworthy that presently, only two aviation fuel marketers namely, Sahara Oil and Conoil Ltd have the capacity to import the product into the country. Both have been the only companies importing the product in commercial quantity while the smaller dealers buy from them to distribute to airlines. In the process these middlemen tend to hoard the product to create some form of artificial scarcity. They have also been accused of making exorbitant profits because the price of JET A1 is no longer controlled by the Federal Government, due to the fact that the market has been deregulated.
Because they rely on credit facilities from banks for their business, the marketers have suggested conditions for an affordable and frequent supply of the product to include, the reduction of FAAN’s increasing charges and rates, the sourcing of JET A1 from the Alesa Eleme refinery, in Portharcourt, Rivers state, waivers on demurrage incurred from NPA, the reactivation of JET A1 supply pipeline from Mosimi to their tank farm at the Muritala Mohammed International Airport, Lagos, provision of alternative access route between the domestic and the International wing and the renegotiation of the bidding process to accommodate fluctuation in the exchange rates.
The above, once again, brings to the fore the problem of infrastructural decay across the various sectors of the economy. The dearth of infrastructure pervading the Nigerian oil and gas industry calls to question, the present state of the refineries in the country. Of the four existing refineries, JET A1 was being produced from just one, the Alesa Eleme refinery, which is presently undergoing Turn Around Maintenance. Even at full capacity, the volume of JET A1 produced from that refinery was abysmally low and inadequate for the needs of domestic airline operators.
The NCAA DG has however, assured that there is light at the end of the tunnel. He said that the Federal Government is doing its best towards effort to refine fuel in the country, adding that aviation fuel is just high quality kerosene, which was being refined in the country in the past. He revealed that the agency is talking with government on means to fast-track the process of revitalizing the refinery and alleviate the challenges being faced by airline operators in accessing the product domestically.
There is no denying the fact that the Aviation sector supports the oil and gas industry and other commercial activities in the country. The NCAA boss recently noted that the Aviation sector is so vital to the economy that more than 300 daily flights are made domestically, more than 75 flights are done on the international route, and most importantly, about 400 helicopter services support the onshore and offshore oil operations. To this end there is the need to find a common ground in the current imbroglio in order to move the industry and by extension, the economy, to enviable heights.
The federal government should as a matter of urgency, embark on strategies to improve and increase local production of JET A1 by ensuring that the Alesa Eleme refinery is up and running rather than relying solely on the marketers. Since the government is having difficulties establishing new refineries, more efforts must be geared towards resuscitating existing ones.
Airline operators on their part should invest in modern and better fuel efficient aircrafts, in order to cut their fuel bills. According to the Assistant Secretary General of Airlines Operators of Nigeria, AON, Mohammed, “this is the time airline operators should be wary of what is sold to them as aviation fuel.” He advised that this is the period House Hold kerosene (HHK) is sold to unsuspecting carriers in the name of JET A1. Although the two are closely related, Jet A1 is well-refined petroleum product for aviation use. Aviation stakeholders have also cautioned that an aircraft engine could be adversely affected when HHK is used. According to them, the continued use of such low-grade fuel (HHK) could cause the engine to shut down while on flight or gather debris that would eventually make it malfunction.
The Nigerian aviation sector must not be allowed to fall off the skies. There is every need for all stakeholders to join hands and ensure its return to the glorious days. If other smaller African economies with less than half of Nigeria’s aviation potentials can do it, then the nation must be saved the shame occasioned by the present circumstances.