- Expert advises airlines to devise strategies against perennial complaints
- Marketers demand cash on delivery for Jet A1
- Airlines may delay, cancel flights
IT would seem the cost of Jet A1 ( Aviation fuel) has hit an all time high in various airports around the country as domestic airline operators are groaning over its price and most times availability.
Investigations conducted by NigerianFLIGHTDECK equally reveal that where fuel is available for operators the marketers insist that cash must be paid before they get the product as some flights are said to be sitting on ground Abuja, waiting for fuel from anywhere.
Our correspondent has learnt that the price of Jet fuel in Lagos per litre is ₦579 while Abuja and Port Harcourt the product sells at ₦599 in Kano however, the product goes for ₦607 as the product now competes with dollar for price. READ ALSO: Domestic airlines list 16 reasons
An operator who spoke with NigerianFLIGHTDECK said this fuel cost is impacting on operational cost massively and stressing that it is a reason fares went up.
Jet A1 accounts for at least 40% of airlines’ operational cost and these recent increases may affect the bottom line and be laid at the feet of the final consumer, the passenger.
One or two airlines have even complained that getting the product is an almost impossible task as fuel for some flights today is unavailable and this may lead to delays and probably cancellations .
Ibom Air one of the airline’s affected by this situation issued an explanation and an apology.
“We have encountered a situation today where aviation fuel is scarce and therefore unavailable at almost all our flight destinations. This has significantly impacted our flight schedule today and may do the same tomorrow.
“We sincerely apologize to all our passengers affected by the current situation.
“At this time, we have no indication when the issue will be resolved, however, we are working with our fellow airlines and fuel suppliers to find a solution.
“Our passengers and the public should please be informed.
We will give an update once we have further information.”
However, industry watchers and experts feel that instead of the usual annual complaints of 40% operational cost by airlines, it would be best if they did something strategic like taking equity in oil and gas as the importance of their businesses necessitate constant interrelationship or come together as a consortium of airline to import the product.
Speaking on the impact of the high fuel price, Aviation Consultant, Babatunde Adeniji said who spoke to our portal explained that crude is a proxy for Jet A1 and everything is refined from crude arguing that with the international situation the price of crude oil is spiking early and the nation’s local issues of forex with regards difficulty in forex and also in logistics, prices of the product have spiked
According to him, the reason there is probably a cash on delivery module is because the marketers have quite a bit of their capital tied up with the airlines, its basically a way of saying:’ I don’t have cash to buy new product because if I sell I need to buy at a higher price also’
He said,”If I sold you Jet A1 at over 400 two weeks ago and you did not pay me for that, paying me back that full amount will not give me enough to purchase new product. There is issue of cash flow and if I go to the bank and add bank interest on top this cost that have gone up, I am In a bigger mess. The marketers are trying to manage their cash flow, they are trying to manage their capital so they can get more out of it and obviously they are trying to get their customers to pay up but the relationship is not general it is between the marketer and airline.
On a way forward, he advocated,”Everyone knows Delta has a refinery, if I am an airline and I have 20 aircraft and I know fuel is such a big part of my operation what are the strategic moves in that direction? Am I taking equity in oil and gas? Have I decided that the importance of my business necessitates that I import? What am I doing? Have we as an airline come together to say let’s but as a consortium? Every year it’s a perennial complain.
“When the pressure is on, many of these marketers sell just to put product away, when demand is as it were. But they try and make back what they lost in the period when it’s better so for me going forward, if airlines understand this is such a huge operating cost they have to make strategic moves to protect themselves against it, there is something called hedging, I’m not even saying do hedging but do something, if the oil and gas is important and you say oh 40%, then involve yourself in that business to ensure your operation. Imagine one of the major airlines has a stake in the oil and gas sector, they will be king and keep running their operations without any hassles and everyone will realize these guys have done something strategically different, he said