Aviation fuel price may force airlines to fly from Ghana - Businessday

August 19, 2016
Experts in the aviation sector say increase in the price of aviation fuel from N105 to N220 per litre in Nigeria may soon cause airlines operating in the country to move to Ghana where aviation fuel is sold for N110 per litre. Two days ago, Emirates airline for the first time flew to Ghana to buy fuel for its Abuja flight. A source who craved anonymity told BusinessDay that British Airways also buys fuel from Ghana. The source said more airlines will soon leave for Ghana to buy fuel since it is cheaper to buy from the country.

Similarly, Air France last week announced that from 2017, the airline will commence three weekly flights to Accra in Ghana from Paris-Charles de Gaulle.

These flights will be operated by Airbus A330 with a capacity of 208 seats until 27 March 2017, then by Boeing 777-200 with 312 seats.

"The aviation fuel cartel causing a 100percent increase in fuel price has forced Emirates airlines to go to Accra to buy fuel. This is making Nigeria lose businesses and revenues," Nogie Meggison, president, Airline Operators of Nigeria told BusinessDay.

Meggison explained that this development will have a ripple effect on other sectors of the economy such as the hospitality sector and catering services. He explained the hotels, where the crew will be kept, the manpower, the landing and parking space fees and other charges that should be paid by the airlines to the Federal Government as charges will soon be paid to Ghanaian government, a development analysts see as a colossal loss to Nigerian economy.

He called on the Federal Government to intervene into the issue by ensuring that it revives the Warri Refinery's Jet A1 pipeline -hydrant system for the supply of aviation fuel.

For instance, about 15 million air travellers passed through Nigerian airports in 2015. The figure for 2014 was about 14million.

Consequently, the analysts say this number may reduce by over 30percent with the current price of aviation fuel which is incurred in price of tickets sold to passengers with low purchasing power.

Specifically, BusinessDay's findings show that operators in the Nigerian aviation industry may have lost at least N45 billion in revenue to aviation fuel scarcity from April to June when fuel situations worsened.

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 travelers.

BusinessDay further gathered that domestic airlines generate an average of N2 billion daily from ticket sales, amounting to N180 billion in the last three months, while N500million 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 90 days.

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.

BusinessDay's checks also show that the eight domestic airlines operating in Nigeria need about 1.2million litres of aviation fuel daily, while about 21 international airlines operating in the country need approximately 1.8million litres of aviation fuel daily.

This shows that for both international and local airlines operating in Nigeria, N660million is spent daily on fuel.

This development is coming at a time when the government of Ghana few weeks ago reduced aviation fuel price by 20 percent in a bid to make Ghana's aviation sector attractive to investors.

Aviation fuel is central to the operations of an airline as it constitutes between 35-40 percent of an airline's cost.

According to John Mahama, president of Ghana, "We have consulted with the national petroleum authority and the national petroleum authority has agreed to adjust the cost of aviation fuel and reduce it by twenty percent.

"I am sure this will improve the volumes that the airlines take and make Ghana a prepared destination for fueling up," the president added.

John Ojikutu, secretary-general, Aviation Safety Round Table Initiative, (ART) told BusinessDay that it is expected that businesses try as much as possible to cut cost. According to Ojikutu, airlines will fly from countries where aviation fuel is cheaper if the situation with fuel price persists in Nigeria.

"Aviation fuel price is also linked to neglect in repairing the pipelines and failure to revive the Warri refinery's Jet A1 pipeline -hydrant system for supplying aviation fuel," Ojikutu said

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

This situation has severally led to cancellations 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- the end users-, raised serious concern on why there had been no repairs of the pipelines in 24 years," Ojikutu added.

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Steven Rich
Sep 17, 2018:
Well done
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