Airlines lose N45bn to aviation fuel scarcity

Operators in the Nigerian aviation industry may have lost at least N45 billion in revenue to aviation fuel scarcity in the last three months fuel situations have worsened, Business Day investigations have shown.

The conservative figure was arrived at based on losses incurred due to flight delays and in some cases outright cancellations that have resulted in hardships to travellers.

Specifically, BusinessDay gathered domestic airlines generate an average of N2 billion daily from ticket sales, amounting to N180 billion in the last three months, while N500 million is also lost daily to the scarcity.

The implication is that the sector may have lost 25 percent of the amount or N45 billion in the last 90 days.

Corroborating, Nogie Meggison, chairman, Airline Operators of Nigeria told BusinessDay on Monday that the scarcity has added to the problems of the operators as it has increased their cost of operation.

“Domestic Airlines in Nigeria are experiencing difficulties in their operations as aviation fuel, (Jet A-I), is presently accounting for up to 50percent of their operating cost, while international airlines have recorded profits during the period of one year as a result of global decrease in oil prices,” Meggison said.

He said that part of the problems facing operators in the industry is the shortage and increasing price of aviation fuel also known as Jet A-1, which is sold between N130 to N190 per litre by oil marketers.

The chairman called on the Federal Government to intervene on the issue by ensuring that it revives the Warri refinery’s Jet A1 pipeline –hydrant system for the supply of aviation fuel.

Joseph Arumemi-Ikhide, executive chairman, Arik Air, said that with 126 flights daily, the airline needs about 500,000 litres a day to fuel its flights. At N170 per litre, the airline will spend close to N85 million daily on fuelling alone, amounting to almost 50 percent of the airlines’ operating revenue.

Arumemi-Ikhide also disclosed that the marketers couldn’t fuel 15 of the airline’s 24 aircraft at the same time due to the inadequate number of dispensing trucks and the constraints of the domestic terminal.

The airlines say they are often delayed as a result of the refuelling chaos, while the dealers say the airlines have become debtors that cumulatively owe them billions of naira, which if unresolved, could drive them out of business.

BusinessDay checks show that airlines pay N150 to N200 for each litre of fuel and buy an average of 250,000 to 500,000 litres for their daily operations, depending on the number of flights run by each airline daily.

John Ojikutu, Secretary General, Aviation Safety Round Table Initiative, (ART) told BusinessDay the aviation fuel price is also linked to neglect in repairing the pipelines and failure to revive the Warri refinery’s Jet A1 pipeline.

Ojikutu mentioned other reasons as costs of transportation, demurrage on the tankers and insufficient number of fuel dispensing trucks.

“This situation had severally led to cancellation of flights and high air fares, thereby discouraging people from flying in Nigeria,” he said.

BusinessDay checks also show that up till 1992, jet-A1 supply to MMA was through pipelines from Ejigbo or NNPC depot. The supply from the MMA depot to the hydrants on the apron, where fuel is dispensed to aircraft, were done also through the pipelines. The method then was quality assurance in practice and cost effective.

“Unfortunately, since the pipelines got ruptured in 1992, nobody in NNPC, Nigerian Civil Aviation Authority, (NCAA), Federal Airports Authority of Nigeria, (FAAN) and even the airlines, which are the end users, raised serious concern on why there had been no repairs of the pipelines in 24 years,” Ojikutu added.

Harold Demuren, former director general of the Nigeria Civil Aviation Authority (NCAA), disclosed a Boeing 737 – the predominant aircraft type in use in Nigeria – consumes 4,219 litres of fuel during a one-hour flight, and at N190 per litre, this amounts to more than N800,000.

Although, aviation fuel is deregulated, operators in the sector say it is a cartel that jointly imports and sells at an agreed price, and when some of the oil marketers record losses in engine oil, kerosene and other products, their balance sheets are made up from the sale of Jet A1.

Last weekend saw several delays and cancellation of flights because airlines could not receive the volume of aviation fuel needed to operate all flights as scheduled and the same situation continued on Monday.

One of the marketers who craved anonymity told BusinessDay that apart from delaying the product for two weeks at the seaport, they also pay as much as $200,000 per day as demurrage for the product.

BusinessDay findings show that FAAN is still charging airlines N2.50 per litre for use of pipeline/Hydrant that has not worked for 30 years till now.

“Until these issues raised are addressed, the chances of airlines enjoying cheaper aviation fuel is impossible, adding that in Accra for example, the price of aviation fuel is cheaper because they don’t pay demurrage or trailer tanker supply. The situation has made operators leave to countries like Ghana, to buy aviation fuel since Nigeria has the most expensive aviation fuel in the civilised world today,” Meggison said.

IFEOMA OKEKE