Local airlines, under the aegis of the Airline Operators of Nigeria, got the nod of the Nigerian National Petroleum Company LTD to import aviation fuel, also known as Jet-A1, five months ago.
This development came on the heels of the speedy intervention of the National Assembly in that period to salvage the fuel crisis that had been rocking the aviation sector.
Accordingly, the AON suspended its threat to shut down flight operations over the hike in the price of Jet – A1 fuel.
The AON had threatened to shut down operations on Friday, March 18, if the government could not find a lasting solution for the marketers’ JET-A price hike. The Vice President of AON, Mr Allen Onyema, addressed the Aviation Committee at NASS on March 15. Onyema stated that airlines collectively agreed to suspend the shutdown to avert further disruption in economic activities considering the key role air transportation played in the logistic mix.
He said, “We are not going to shut down flight operations because discussions are ongoing between us and the relevant players in the oil and gas value chain to find a lasting solution to the problem.
“We are negatively affected by the increasing price of aviation fuel, but as patriotic investors, we will not take any action that will paralyse the economy.
“As patriotic Nigerians and investors, we will continue to engage government and its agencies on the way out of this problem,” he said.
He said the association considered very delicate, the precarious situation of aviation fuel scarcity and increment in price as a development that could be exploited for political capital by players in the governance space.
Onyema, however, said price hike was suffocating for local carriers who continued to operate flights under increasing costs regime, spending millions of naira to fill aircrafts with aviation fuel.
He said airline operators were considering scaling down on the number of flight frequencies to minimise the cost of operations.
Onyema further said local carriers were not considering any further increase in air fares so as not to shut out ordinary Nigerians desiring to travel by air.
In light of these, stakeholders have reacted to the plans of the AON to import Jet A1 into the country.
The President, Aircraft Owners and Pilots Association of Nigeria and a former Chief Executive Officer of Associated Airlines, Mr Alex Nwuba, in a recent interview with the media at the League of Airport and Aviation Correspondent conference, expressed concerns, stating that airlines taking up fuel import as a competitive project from the oil companies would result in failure.
He also observed that prices of aviation fuel would still go up simply because the dollar had strengthened, and fuel price and operation costs had also risen.
He said, “Let’s start with the solution. The airlines chose to import fuel themselves which I clearly stated was not completely thought through because the airlines cannot do it better than the oil companies that have been doing it for decades. So, that wasn’t completely thought through.
“But there are other mechanisms available to the government itself to find fuel at cheaper sources that can be brought into the market to ameliorate the problem.
“So there are solutions. There is nothing that doesn’t have a solution. It is just a matter of having the discussion around how we can solve this problem and provide solutions.
“Let’s be sincere about business. Business in its very nature is competitive. So, distress will take out a lot of competitors. When you take out competitors, it allows you to break that flexibility in your business conduct. That conduct allows you to push prices in the direction that is more suitable for you to make your business more profitable. Businesses are first and foremost responsible to their shareholders. Asking airlines to cooperate to sustain business is anti-business in a way of looking at it realistically.
“Look at what happened. Two airlines have jumped and fares have jumped almost 50 per cent. That’s more money to mitigate the challenge the industry is facing. The truth is that we can’t run away from the fact that prices will go up. Prices will go up simply because the dollar has gone up.
“Fuel price has gone up. Operation cost has gone up. So, naturally, those costs must be absorbed by some mechanisms – either the consumers paying or the government providing support through subsidy. So, there are many ways to look at the same problem but asking airlines to cooperate to sustain each other may sound good, altruistic and for the benefit of the economy but that’s not the way business functions.
“I think, as an industry, if we re-engage the marketers, the cooperation can come, and you can provide solutions for them that make the product cheaper. There is something in aviation called ‘tankering.’ There are some economies in the world where fuel is one-thirds the cost of what it is in Nigeria. So, in those markets, the airlines from there would have fuel.
Also speaking, industry expert and the Chief Executive Officer, Centurion Aviation Security and Safety Consult, John Ojikutu, had this to say: “It’s not something that’ll work for them. Do they know the problem that is associated with the fuel? First of all, they need foreign exchange, do they have it? How will they transport it from the seaport to the airport? Have they looked into all these things? The problem they are having with the fuel marketers is that they owe them. The foreign airlines are not complaining, so why are they complaining?
“You bring in the fuel, are you going to use naira to buy it there? You’re going to use dollar, so where do you get the dollar? That’s why I keep saying that they have a very poor business plan from the beginning.
“Number two, the foreign exchange that some of them are making, including that of those who go outside the country to the West Coast to South Africa and all that, where is it? Where do they keep it? And I said airlines should open a domiciliary account where all of them that are making foreign exchange deposit their dollars and let the Central Bank of Nigeria give them naira. Anytime they need money, they return the naira equivalent which they gave them at that time.
“Their problem is that they owe fuel marketers. How do they pay those people back? They have collected at least three intervention funds. They will get that fuel but stop it at the high sea and sell to Cotonou and Ghana. They will transport it. There’s no pipeline that brings the fuel directly to the airport. The tankers are going to collect their money. They have to be thinking about some of the things that they are saying. How feasible is it? So, I don’t see any sense in what they want to do.”
“All they need to do is to go and look for the money that they have been piling up in dollars.”
Article first published on the Punch Website