Huhuonline.com can disclose that Operators of airlines in Nigeria on Monday warned that the lowest air ticket in the country could cost as much as N120,000, driven by the current exorbitant price of aviation fuel, or Jet A1.
This came as the intervention of the House of Representatives, the Nigerian National Petroleum Company, oil marketers, and operators of airlines staved off the near-total collapse of the nation’s aviation industry on Monday.
The price of aviation fuel, which crossed the N600 per litre mark in Lagos on the first working day of the week, had forced several airlines to reschedule flights across the country, leaving thousands of intending passengers stranded.
However, a meeting held by airline operators, officials of the NNPC and the leadership of the lower chamber of the National Assembly, brought temporary relief to the troubled industry.
The meeting ended with a comprise price of N500 per litre for aviation fuel. The price, it was agreed, would be in force for three days, within which it was expected that a more realistic price would have been arrived at.
Jet A1 has witnessed an astronomical price increase, from about N190 per litre at the start of the year to a current price of N670 per litre.
At this price, operators of airlines warned at the meeting on Monday, would be impossible for them to break even without a substantial increase in airfares. At this price, the Airline Operators of Nigeria warned that air tick for the economy class should go for between N85,000 and N120,000.
In the alternative, they threatened to shut down the aviation industry nationwide.
It was this threat that led to the meeting at which the N500 per litre price was agreed upon. Those that attended the meeting included the Deputy Speaker of the House, Ahmed Wase; Group Managing Director, Nigerian National Petroleum Company Limited, Mele Kyari; Chairman of Air Peace who is also the Vice-President of the AON, Allen Onyeama; Chairman, Major Oil Marketers Association of Nigeria, Olumide Adeosun; and Chairman, Depot and Petroleum Marketers Association of Nigeria, among others, to hold an emergency meeting-within-meeting discussion.
The resolutions that were arrived at that meeting showed a desperate response to a threatening situation in a nation’s aviation sector.
“We know this is a very difficult situation. We know that once aviation fuel increases, prices of flight tickets will certainly increase and this can surely cause pains for Nigerians. That is why we are working with you to ensure that those pains are minimised to the barest minimum. And one of the elements is the pricing of aviation fuel,” NNPC’s Kyari said.
“So, what we have engaged with MOMAN, DAPMAN and the airline operators is that in three days’ time, their representatives will sit down and agree on a transparent base for pricing. That means that they ought to have a referenced benchmark that is quoted transparently in the market.
“They will have a referenced exchange rate for the naira so that everyone can compete. They will also agree on a premium, which currently differs from customer to customer, depending on the volume you buy and the credit level.
“These are the things they can negotiate in three days and close, so that going forward, there is a transparent decision on pricing. This will no doubt throw up the actual value of the product in the market. You will no longer see these discrepancies we have seen where some people are selling at N445 and some are selling at N630. This will completely close, such that you will not see these differences.”
According to him, it was agreed that “between now and the three days that they have to close negotiations, they will sell at N500 in the next three days and after that, they will switch to the new price that everyone can access.”
He disclosed that while the fuel was selling on Monday at N445, some marketers were selling it as high as N630, and added that “ we don’t think this is normal and so, we discounted it.”
“Lastly, as requested by the Airline Operators of Nigeria, they will be granted a licence by the authority to import petroleum products, particularly ATK, so that they can have a way of benchmarking the sales of other customers and can also bring in cheaper products whenever it is possible.”
On his part, Onyeama who agreed with the resolutions at the meeting said that at N500/litre, “our unit cost per seat will now be about N85,000, barely insurance and other things; that is our pain.”
“I wish we could buy this fuel at N200 so that Nigerians can afford to buy it. That is our predicament. And so, the public should understand if there is a shift in what they are paying now and what they are going to pay later.
“Anybody can calculate it just as it has been done here, to buy 8,000 litres of fuel at N500/litre. How much will that give you for just a one-hour flight?”
Onyeama warned however that should the price of N670 per litre persist, the flying public may be forced to pay as much as N120, 000 per economy-class ticket.
“I have the mandate of every airline in this country to announce to you that if they cannot come down from their rooftop, we have only three more days to be able to fly. We are not threatening this country. We have been subsidising what we are doing.
“I will give you the rate as of today, at N630, N640, N650/litre, we have an aircraft going to Kano that has about 7,000 litres of fuel on it. Multiply it by N630. The unit cost per seat already is about N70,000 per seat. You have not talked about the insurance that is very static and Nigerians pay a lot of insurance premiums because this country is stigmatised.”
“You have to insure in London and other places abroad. It is a loss. 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 we use in insuring one plane is what the legacy airlines of this world use in insuring about three planes. So, the Nigerian airline is dead on arrival.
“Yet, the fuel cost which was supposed to be about 30 to 40 per cent (of operational costs) in every other clime in the world, in Nigeria it is about 70 per cent even before this time (of scarcity). So, you can now see the mortality rate of airlines in this country and the causes.”
“From what is happening if we continue this way, the cheapest ticket you will expect from airlines will be about N120,000 for Economy (Class). And we don’t want to do that because it will not help the ordinary man.
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