By Derrick Bangura.
Less than ten days after domestic airlines complained that oil marketers had raised the price of Jet A1 (aviation fuel) to N400 per litre, the product’s price has risen to N420 in Lagos and N450 at other airports outside Lagos and Abuja.
Domestic airlines have responded by raising base fares to almost N50,000 each flight.
The price of aviation fuel jumped to N420 per litre on Sunday, up from N400 per litre on Thursday, without prior notification to airlines, according to THISDAY.
However, depending on the location where the airport is located, the price ranges from N420 and N450 per litre, particularly in the northern portion of the country, where the price is expected to soar to N500 per litre in the coming days.
THISDAY has also learned that the pricing is currently determined by the naira’s exchange rate versus the dollar, at least until the country begins to refine the product locally.
“A litre of fuel costs N420 in Lagos today (Sunday), while it costs between N430 and N450 in certain northern states. Because aviation fuel is in short supply in the country, the price of the product may rise.
“About three weeks ago, the product was sparse in all of the country’s airports, which contributed to some of the flight delays we were experiencing at the time.” “The government must intervene before the issue spirals out of control,” a source told THISDAY.
A spokesman for one of the main domestic airlines told THISDAY that the new fares were a response to the rise in the price of aviation fuel, the rise in the cost of handling rates by aviation handling businesses, and the change in the currency rate.
The official claimed that airlines needed to raise fares to stay afloat, claiming that if they didn’t, most of them would cease operations within the next three months and that until now, airlines have been subsidizing the base fare.
“We raised fares in response to rising aviation fuel costs, which are increasing every day without warning to carriers.” We sell tickets for less money, but we fly people using the new aviation fuel prices, which means we’re losing a lot of money. Many of us will not last three months if we do not raise rates.” We’re dealing with a lack of infrastructure, currency depreciation, high aviation fuel prices, and a rise in the cost of handling by aircraft handling businesses. Will you sell at the same price if you go to the market to buy to resale and discover that prices have suddenly gone up? No! We’re all feeling the pressure financially.
“We should place the blame where it belongs, which is on forex and aviation fuel, which is the primary cause of the increase,” the official stated.
However, in response to the increased fares by airlines, Capt Ado Sanusi, the former CEO of Aero Contractors and the former Managing Director of the Nigerian Airspace Management Agency (NAMA), condemned the decision of Airline Operators of Nigeria (AON) to increase fares, claiming that such a decision was contrary to the free market and anti-trust laws.
“I am not opposed to airfare increases in response to rising operating costs and the price of aviation fuel, but AON cannot come out and set ticket pricing.” That is against the law as well as the free market.
“Each airline should consider its own costs while setting prices. Because airlines have various financing models and should establish their own fares, when fares are fixed, some airlines will be badly impacted and may go out of business,” he said.
However, another official for one of the airlines told THISDAY that AON did not set pricing for the airlines; rather, each airline, recognizing its financial issues, decided to raise fares, revealing that not every airline set its base fare at N50, 000.
A top AON official also told THISDAY that he was unaware that the organization controlled airline fares, emphasizing that airlines set their own fares.
According to the operators, aviation fuel accounts for 35 to 40% of total airline costs, and some stakeholders are afraid that if the difficulties in the sub-sector are not addressed quickly, some operators may be compelled to shut down operations.
Dr. Obiora Okonkwo, Chairman of United Nigeria Airlines (UNA), raised the alarm about the price of aviation fuel rising by more than 100 percent in the last year around two weeks ago.
He had also stated that the currency rate had declined from N340 to N570 to a dollar during the same period, highlighting the importance of the government monitoring the industry’s progress in order to avoid collapse.