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Aviation Fuel: FG Plans Local Refining to Check Price Hike

By on April 29, 2011

To make scheduled domestic airline operation profitable, the Federal Government has said that it would ensure the refining of aviation fuel (Jet A1) locally in order to bring down the prices.

In the last four months,  the prices of the product has risen from N80.00 per litre to N160.00 per litre, which is 100 per cent increase.  This  has in effect    adversely affected the profitability of the airlines.

The Director-General of the Nigeria Civil Aviation Authority (NCAA), Dr Harold Demuren in an interview with newsmen  in Lagos   said that this measure will check  high cost of aviation fuel.

Although it has been confirmed that oil marketers operate a cartel and fix prices of the product at whim, government thinking  is  that   local refining of the product, would eliminate import charges and other logistics responsible for the high price.

It would also eliminate storage costs as the Nigeria National Petroleum Corporation (NNPC) would use its facilities to store the product and bear the cost therein.

“Price of aviation fuel is ridiculously high in Nigeria . We cannot continue this way. Aviation fuel is now N160.00 per litre and airlines did not double their fares. The Federal Government is doing a lot to refine fuel in Nigeria . We are already talking with government,” Demuren said.

THISDAY last week reported the meeting between NCAA and oil marketers on how to reach agreement between and the airlines over debts owed by the later, which is  said to have amounted to N2 billion and also to stop cash and carry method.

Marketers insist   cash and carry method was the only way they could get their money from the airlines.

Passengers have suffered undue delays due to the fact that airlines do not have fuel to fly their aircraft and sometimes these delays last up to two or more hours while the airline is negotiating with the marketers, humbly requesting for credit, “even for this one flight.”

THISDAY learnt that because many of the domestic airlines obtained credit facilities from the banks they pay their revenues direct to these banks as the customer is paying for his ticket.

This leads to cash squeeze as some of the airlines may not have the immediate cash to pay for the fuel purchase, so rallying the cash causes delay and these affect the passengers and the whole airport operations.

One of the major airlines expends about 600,000 litres of aviation fuel every day at the cost of N76.2 million and it has been facing the challenge of fuelling its aircraft after   landings before it would take passengers to the next destinations.

Commercial airlines purchase fuel worth over N120 million everyday and as Demuen explained, it is not a standard practice to insist that such huge sales should be conducted on cash and carry.

Source : Thisday