• Friday, April 19, 2024
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BusinessDay

Making our aviation industry competitive

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A recent media report declared the Kotoka International Airport, Accra, Ghana, more competitive in its aviation services and allied products than Nigeria’s prime gateway, the Murtala Mohammed International Airport (MMIA), Lagos. Specifically, the report pointed out that it was cheaper to purchase aviation fuel- also known as Jet-A1, in Accra, Ghana, than in Lagos.

Many aviation operators and analysts have deplored this development and have severally called on the Federal Government and oil marketers to find a solution that will not only improve the supply of the commodity, but also at a price that will ensure that airlines lifting Jet-A1 from the Lagos airport are not put at a disadvantage compared with those preferring Accra, Ghana. Airline Operators of Nigeria (AON) has, over the years, cried out over the exorbitant price they pay for fuel, a component of their expenses which, they say, takes close to 40 per cent of their total operational costs. Analysts have attributed the high cost of aviation fuel to the huge debt overhang on the airlines; there is hardly any airline that is not indebted to aviation fuel marketers.

This is besides the sum of N4.18 billion the airlines owe the Federal Airports Authority of Nigeria (FAAN), and the N400 billion they owe the banks. To avoid this undesirable development, one which has contributed to the under-development of the local aviation industry, foreign airlines route their Nigerian flights through Accra to buy Jet-A1, a measure domestic operators who do not fly the West African Coast cannot afford, as it will amount to additional cost of landing and parking charges in Ghana. The question has always been why the disparity in the price of aviation fuel between Nigeria and Ghana? The media report noted that Jet-A1 sells for between N125 and N150 per litre in Nigeria, but approximately N96 in Ghana. All over the world, airlines and airport operators are constantly seeking ways of minimizing the cost of operations and maximizing profits.

But here in Nigeria, there is the pervasive issue of inefficiency and sharp practice. Given the fact that there are over 14 oil firms supplying aviation fuel at the Lagos airport, one would expect prices to be competitive. But according to industry analysts, marketers have formed a cartel which operates by creating an artificial scarcity of their product with the attendant high prices. There is also the challenge of infrastructure at the Lagos airport. Because the fuel hydrants at the airport are not always functional, oil marketers incur extra costs buying and maintaining bowsers, and employing drivers to run their fleet of bowsers to move fuel from the depot to the tarmac to feed airplanes.

In other clime, these extra costs do not occur as fuel is moved through hydrants to the fuel tanks of aircraft. In Dubai, and recently at the Heathrow Airport in London, a sole supplier was granted the concessionaire to supply fuel to all operators respectively, in order to maximize the economies of scale associated with such transactions. In Dubai, Shell has the concession to supply the entire airport with aviation fuel and allied products. In London Heathrow, it is the Heathrow Hydrant Company Limited that is charged with the responsibility of supplying fuel to the operators at a competitive price.

Until something is done about the way aviation fuel is bought and supplied, and the infrastructure at our airports are put right, the quest for a competitive aviation industry will continue to elude us, and Ghana will continue to take the shine off us.