By Chinelo Obogo, [email protected] 07064781119
The rising incidence of flight delays, cancellations and disruption across airports in the country which began late February following acute shortage of aviation assumed a dangerous dimension by the first week of March as many airlines had ran out of aviation fuel.
As at March 3, Dana Air had sent a message to its customers, apologising for the disruptions and explaining that there was scarcity of aviation fuel but promised that they were doing their best to resolve the issues.
The scarcity persisted and two days after Dana’s apology, all other scheduled domestic operators communicated their passengers citing cost and scarcity of aviation fuel as reason for flight cancellations.
Divided opinions
Over the past few weeks, opinions have been divided on why there is scarcity of aviation fuel. While some stakeholders blamed the Ukraine war and forex scarcity forsupply disruption, others including former Senate President, Bukola Saraki, was of the view that there was no justification for the increase in price.
According to Senator petroleum products must have been ordered, paid for and shipped before this Ukraine war started.
Reacting to the issue on an online video he posted on his twitter handle, the former Senate President said: “I want to address the cost of diesel and jet fuel at the moment. We have seen prices of diesel and prices of air fare go up as well. This has really impacted the cost of food and transportation. I want to ask a question. Why has the cost of diesel and fuel gone up from N300 to almost N900 and the cost of jet fuel also has also doubled when those products must have clearly been ordered, paid for and shipped before this Ukraine war started? It does not make sense. It is just that some people are benefitting at the expense of Nigerians and I think the government and those involved need to come down hard on this. There is no justification for why the price of diesel and jet fuel should be so high because those products, definitely must have been shipped two months ago and these were not the prices now. The government must step in and defend Nigerians. People are going through a lot of hardship and we must confront this because it doesn’t make sense.”
House of Reps wades in
As at Monday, 14, 2022, the Airline Operators of Nigeria (AON), Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mele Kyari, Major Oil Marketers Association of Nigeria (MOMAN) and other stakeholders met with the Deputy Speaker of the House of Representatives, Ahmed Wase and the House Committee on Aviation headed by Nnolim Nnaji.
The Vice President of the AON and chairman of Air Peace, Allen Onyema, who spoke on behalf of the airlines, expressed disappointment that the marketers were not able to tell the gathering how much the product was bought per litre.
Addressing the deputy speaker, he said: “Nobody on this side of the divide has answered your question. You have been asking them one particular question and everyone is dancing around it. What the deputy speaker wanted to hear is how much this product was bought per litre. By now, you must have computed the unit cost per litre, but they are dancing around it and telling stories. Before they came here, they were supposed to have computed their unit cost because we can tell you our unit cost per seat. You have asked this question so many times and no one has answered it. I have the mandate of every airline in this country to announce that if they cannot come down from their rooftops, we have only three more days to be able to fly. We are not threatening this country because we have been subsiding what we are doing. The rate as at today (Monday, 14, 2022) is between N630 and N640.
“We have an aircraft going to Kano and that one has about 7000 litres of fuel on it. If you multiply it by N630, the unit cost per seat already is about N70, 000 per seat. We have not talked about insurance that is very static. All the insurance companies in Nigeria put together cannot even insure one aircraft, so, you have to go abroad to insure and they slam us with heavy premiums. What Nigerian airlines use in insuring one plane is what the legacy airlines use in insuring three planes, so domestic airlines are dead on arrival. Yet, the fuel cost which was supposed to be about 30 to 40 percent of operating costs in every clime in the world, is about 70 percent in Nigeria even before now. So, you can now see the mortality rate of airlines in this country. They have refused to answer the question. Whether you got money from CBN or from the black market, how much is the unit cost of your acquisition, so that we would know if the airlines are cheating you or you are cheating the airlines, or if you formed a cartel to increase your prices overnight?
“From what is happening, if we continue this way, the least ticket anyone would expect from airlines would be N120, 000 for economy and we don’t want to do that because it would not help the ordinary man. I have the mandate of the AON to demand that we should be given license to import fuel. If we can buy jets that cost millions of dollars, we can also afford to import fuel. NNPC should give us the right to import fuel and we won’t complain.”
After the meeting on Monday, it was resolved that the price of aviation fuel be brought down to N500, until the issue was resolved.
On Tuesday, March 15, the AON and the fuel marketers represented by the Major Oil Marketers Association of Nigeria (MOMAN) and Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and the NNPC representatives met again in Abuja to resolve the impasse. The meeting was a follow-up to the stakeholders’ meeting held at the House of Representatives where it was agreed that jet fuel would be sold at N500 per litre for three days.
The AON was represented this time by the chairman of United Nigeria Airlines, Obiora Okonkwo, who insisted that buying fuel for over N500 per litre is not sustainable, saying no Nigerian would be able to fly if the airlines increase ticket fares.
At the meeting, the chairman of Nepal Oil and Gas Services Limited, Ngozi Ekeoma, debunked the insinuation that aviation fuel marketers formed a cartel to create artificial scarcity and increase prices, saying the parameters for determining the price remain unambiguous.
“Aviation fuel is not a cartel based product. The parameters for determining prices are there. As of today, a vessel costs $25,000 per day at the port. There is the marine cost, we have problems even loading the ATK (the jet fuel). We use trucks that run on diesel. This also adds to the costs. We will have to put all of these costs. For every litre, I am paying FAAN (Federal Airports Authority of Nigeria) N3:50k,” she said.
By Wednesday, March 16, MOMAN continued talks with domestic airlines and after an extensive discussion, its Executive Secretary, Mr. Clement Isong told journalists that the crisis experienced by the operators is due to the increase in price of crude oil and its derivatives like aviation fuel, petrol, diesel and kerosene fuelled by the invasion of Ukraine by Russia.
Isong said the situation could also be eased if oil marketers are able to get foreign exchange at decent rates instead of sourcing from the parallel market and advised the domestic airlines to change the way they do business to enable them get steady supply of aviation fuel to run their operations. He expressed optimism that international supply of crude will soon adjust to meet demand, and that prices will come down to more acceptable levels.
“We understand their pains even the Federal Government that is paying a higher cost to subsidise petrol. The rise and fall of oil prices is cyclical. We have been here before and we are hoping that within a short period that international supply of crude will adjust to meet demand, and that prices will come down to more acceptable levels.
“There is aviation fuel in the country. However, the product is expensive. Many of us who have contracts with international airlines have to keep stocks for them. Now, international airlines pay for their products based on a pricing formula so it is predictable. There is no quarrel on the price, it is platts plus premium. The Premium is fixed. The Platts, which is a price benchmark service for the oil industry, goes up and down pending on the international market price,” Isong said.