“3 days till collapse” - fuel price pushes Nigerian airlines to the brink
Exorbitant fuel prices could lead to Nigerian airlines shutting down operations.
Allen Onyema, the Vice President of Airline Operators of Nigeria (AON) and CEO of Air Peace, said during a public address at the House of Representatives on March 14, 2022, that Nigeria’s airlines cannot sustain the recent hike in fuel prices. He stated they were at risk of imminent collapse within three days unless a solution was found.
Speaking about current fuel prices in the country, Onyema said: “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 subsidizing what we are doing.”
According to Onyema, prices of aviation fuel are hovering between N630 ($1.52) and N670 ($1.57) per litrer. That represents a steep climb from N190 ($0.46) in January 2022, according to a report from Business Insider Africa.
He added that if unresolved, the current situation could lead airlines to hike Economy class airfares to at least N120,000 ($290).
While airlines are grappling with rising fuel prices globally, Onyema said the situation was worse for Nigerian carriers because fuel accounted for a greater proportion of their cost base even prior to the current crisis. He added: “The fuel cost which was supposed to be about 30 to 40% [of airline operational costs] in every other clime in the world, in Nigeria it is about 70% even before this time. So, you can now see the mortality rate of airlines in this country and the causes.”
Nigeria imports over 90% of its refined petroleum products, despite being the largest producer of crude oil in Africa with four refineries, according to a report from Reuters.
Onyema accused oil marketers and regulators for a lack of transparency after they refused to reveal the price at which they import fuel into the country. He called on the Nigeria National Petroleum Corporation to grant Nigerian airlines permission to import fuel.
“We are now demanding that we should be given a license to import this fuel.” said Onyema. “If we can buy jets that cost about $80m, we can afford to import this fuel. Let NNPC give us the right to import fuel and we will not complain to you.”
After Onyema spoke to parliament, an interim agreement has now been established on March 14, 2022, between oil regulators and Nigeria’s airline operators to commence talks regarding pricing on a transparent basis according to a statement released by the NNPC.
The NNPC’s Group Managing Director, Mele Kyari said: “In three-day time, representatives from Major Oil Marketers Association of Nigeria (MoMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and the airline operators will sit down and agree on a transparent basis of pricing.”
The agreement will grant carriers with the right to import Aviation Turbine Kerosiene (ATK) and allow for a way to quote transparent benchmark prices in the market, according to Kyari. Kyari also stated that this will eliminate price discrepancies in the market.
Aviation Jet A1 fuel will be sold at N500 ($1.20) for the three days from March 14, 2022, as an interim measure to prevent airlines from closing their operations.
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