The rising price of aviation fuel has led to a corresponding increase in the operating cost of domestic carriers. This has equally affected air fares. But experts say the solution to the challenge lies in fixing pipelines that supply fuel to airports and refineries, as well as providing more storage facilities, reports Aviation Correspondent KELVIN OSA OKUNBOR.
DOMESTIC carriers are grappling with two major challenges: scarcity of aviation fuel and high cost of the product. These have become a nightmare for airlines.
Their operators said the increase in the price of the product has raised cost of operations by over 40 per cent.
They argued that if the situation is not addressed quickly, the increase would reduce their profit margins substantially.
Besides the high price of aviation fuel also known as Jet A I, its unavailability due to ineffective supply, remains a headache for players. Many airlines’ officials said the problem has led to the cancellation or delay of flights.
Investigations reveal that a litre of the commodity is sold for between N160 and N170, which experts said is too high.
For a 50-minute flight (Lagos to Abuja for instance), a Boeing 737-300 consumes 2,250kg of fuel.
The Executive Chairman, Airline Operators of Nigeria (AON), Captain Nogie Meggison, said the price of fuel had remained unstable for some time.
Worried by the unavailability of aviation fuel at the Murtala Muhammed Airport, Ikeja, Lagos, the AON called on the Federal Government to revive the Aviation Turbine Fuel (ATF) refinery in Warri, Delta State. It urged the government to fix the pipelines supplying aviation fuel to the airport.
The domestic carriers’ umbrella body said aviation fuel forms over 40 per cent of their operating cost, adding that the figure is too high for business. He called on the Federal Government to intervene by ensuring that it revived Atlas Cove and Mosimi pipelines which supply aviation fuel.
Meggison said when the pipelines were working at full capacity, they supply aviation fuel to the airport uninterrupted.
The facilities, he said, were shut in 1996 by the military government.
Earlier, Meggison said, aviation fuel was ferried to the Murtala Muhammed Airport without trucks. The Nigeria National Petroleum Corporation (NNPC), he said, should repair the pipelines, which have been abandoned for 18 years.
He said: “We need NNPC to revive this pipeline so that airlines can get cheaper and cleaner aviation fuel.”
He listed other problems in the sector to include the high cost of importing fuel, delays at seaports, which have translated to high demurrage for marketers, delay in loading at the Apapa Port and inefficient transportation by road from the Apapa Port to the Joint Users Hydrant Installation (JUHI) at the airport.
As a result, the marketers want the aviation fuel market deregulated.
The Warri Refinery, he said, can produce ATF, calling on the government to look into the issue as it would further reduce costs.
Pumping fuel using pipelines and hydrant, the AON boss argued, is safer and cost effective compared to the use of tankers and fuel bowsers, adding that abroad, tankers are not deployed for fuel distribution.
He recalled that some decades ago, Nigeria used hydrant both at the defunct Nigeria Airways Limited(NAL) apron, the General Aviation Terminal (GAT), the international and Cargo ramp to supply aviation fuel to airlines.
He said it was sad that the government allowed aviation fuel distribution to deteriorate from digital to analog, adding that until the issues are addressed, the chances of airfares falling are slim.
He cited Cotonou, Lome and Accra as cities where the price of aviation fuel is cheaper because the airlines do not pay demurrage or use trucks to carry aviation fuel.
The Deputy Managing Director, Arik Air, Captain Ado Sanusi,, said the increase in the price of aviation fuel was affecting airline operations.
Some of the effects, he said, includes delayed and cancelled flights.
He said: “Aviation fuel is another major factor affecting the industry. The cost of aviation fuel is not only high but the product is not always available.
“It is unfortunate that Apapa, Lagos is the only discharging point and it has to be trucked to the airport in Lagos through the Apapa gridlock and to Abuja and other parts of the country.
“It is disappointing that a vast country like Nigeria is still importing aviation fuel and all the entry point is from Lagos before it is trucked to other parts of the country. Most often preference is given to premium motor spirit (petrol) before Jet A1 (aviation fuel) is discharged.
“The reservation of the product is small.There are some days Arik will need about 500,000 litres of the product but the reserve is 350, 000 litres. The issue of aviation fuel availability in the country needs to be looked into by the government. The infrastructure for the distribution of fuel to the airports has not developed to meet the growth of the airlines in the country.
“Foreign airlines come here once or twice daily and pick up fuel in Accra, Ghana or Cameroon, whereas Arik domestic, regional and international operations source fuel from Nigeria. This sometimes causes delays and cancellations of flights. If fuel comes in late and the some of the airports close by 6:00 or 6:30 pm, some of the flights will inevitably be cancelled.
It is most unfortunate that while the number of local airlines is increasing, the airport facility infrastructure is not being expanded.
“This has given rise to the congestion of the domestic terminals of the Lagos airport, Murtala Muhammed Airport Domestic Terminal 1 (GAT) and 2 (MMA2) as they are still using the small apron space meant for few airlines. The GAT terminal facility needs to be expanded. Also the apron of GAT needs to be expanded. The unserviceable airplanes parked at the apron should be removed to make way for operating aircraft.”
The Chairman/Chief Executive Officer, Air Peace, Allen Onyema, said many airlines do not have enough aviation fuel because of indebtedness. He said because they are unable to settle their bills promptly, the independent fuel marketers are reluctant to make the product available to them.
When Air Peace started operations, he said they were operating a direct cash payment system with fuel suppliers.
He said: “Many domestic airlines are suffering from inadequate aviation fuel because they owe fuel marketers. This is not good for business. When we started up operations, we were paying cash on delivery for our aviation fuel.
“We are in discussions with four fuel marketers to ensure we have uniterrupted supply. That is the way to go.”
The Managing Director of Medview Airlines, Alhaji Muneer Bankole, has urged the government to resolve the challenge of aviation fuel to reduce the burden of domestic airlines.
Bankole said: “The industry should have a window where we can service fuel. Now, how many airlines do we have in the country? The challenges are enormous and we are not making much profit, but we are just striving to remain in business.
“The situation where airlines have to pay over 40 per cent of their earnings on aviation fuel must be addressed if the airlines, which are already struggling with numerous challenges, are to remain in business.”
An aviation expert, who pleaded not to be named, described the development as worrisome.
He said: “The airlines have always claimed that the marketers are anti-progress as they insist on a cash-and-carry arrangement prior to delivery. They also claim that there are insufficient fuel dispensing trucks for the operators, especially at peak hours.’
According to one of the leading domestic operators with 126 flights daily, the airline needs about 500,000 litres daily to fuel its flights. At N170 per litre, the airline will spend close to N85 million daily on fuelling alone.
He also said the marketers cannot fuel 15 of the airline’s 24 aircraft at the same time due to the inadequate trucks and the constraints of the domestic terminal.
“These cause congestion at the aerodrome because we have many aeroplanes, wide-body and narrow-body. At times, they want to service an airline’s two aircraft, go to another one, do three, just like that till everyone is satisfied. This, on its own, is a challenge. It’s not as if we don’t have the money to pay them, but there are equipment and space constraints. As a result, we have our own fuel dump to take care of our operations in case of a sudden scarcity of Jet A-1. The operating environment is really harsh,” he said.
Airlines’ officials caomplained of refuelling problems, saying they were affecting them. For dealers, the problem is the airlines, which owe them billions of naira, lamenting that if the debts are not paid, they would be out of business.
However, experts have a solution to the problem of increased fuel.
“It is left for airlines to look, for instance, at their price structures to make sure we mitigate the effects of its rise in the industry.
“The government policy is affecting our operations and each airline will have to look at what it does to mitigate its effects. It is a problem that we are talking with AON and the marketers with. Some things are not in our hands. The good thing about this market is competition; it drives efficiency and the prices, an expert said.
An aviation analyst, Mr. Olumide Ohunayo, said the Federal Government should come up with a policy that would assist operators.
Such policy, he explained, should focus on taxes’ reduction, fuel supply and pricing.
He said: “What we need is a national airline policy that will strengthen the industry and our airlines. The policy should include a reduction of taxes, modernisation of air traffic control and regulatory burden reforms.”
“It should address the stabilisaton of aviation fuel prices, former secretary, African Airlines Association (AFRAA), Mr Nick Fadugba, said.
The government, he said, should tackle these problems to enable airlines survive.
He said the problems could kill the airline business.
