By Louis Ibah
Depots run dry of Jet A1
In the last three weeks, the operations (and indeed survival) of the domestic airline industry has come under severe threat following acute shortage of aviation fuel, popularly known as Jet A1.
Importers and marketers of the product had warned about the middle of March (this year) that the continuous depreciation of the naira and the scarcity of foreign exchange (forex) could hurt the importation of Jet A1 for the aviation sector, imploring the government to step in and make forex available to them.
Sadly, that warning was not heeded, and by last week, the marketers had written to inform airline owners that most depots had ran out of stock and that what was available could only be rationed to go round the airlines for a couple of days.
Effect of fuel rationing
The airlines could not operate at optimal capacity. And over the weekend, it was reported that almost 70 per cent of scheduled commercial flights were rescheduled, while 30 per cent were cancelled outrightly. The cause of flights being rescheduled comes about as airlines have to make use of one or two aircraft that they are able to fuel to service so many routes where more than four aircraft were usually deployed. This trend, had left most departure halls of Nigerian airports bursting with frustrated passengers. Those who lack the patience to wait to be boarded whenever there was an available aircraft, opted to get their ticket refunds to go by road. In the wake of this entire crisis, passenger patronage has reportedly dropped by 55 per cent as more Nigerians are becoming wary of flying. And that is perhaps coming at a time when the airlines need the volumes in passenger patronage to offset a rising cost of operation fuelled by high insurance premium, multiple taxes to airport and regulatory agencies, huge wage bills to staff, high cost of aviation fuel and foreign exchange to do routine maintenances overseas.
A senior airline official told Daily Sun the fuel crisis spells disaster for investors in Nigeria’s domestic airline industry. “The domestic airline business is on the brink of a collapse and it is so unfortunate that the Federal Government and relevant agencies are not reacting as if it is an emergency situation where thousands of jobs could be lost at the end,” said the official.
“And this is what I mean: by the time 60 to 70 per cent of scheduled daily flights are cancelled, and you park an aircraft that should be flying in the sky to generate revenue for you, and at the end of the month, you are still obliged to pay staff salaries and insurance on the aircraft, then the only inference to get out of this is a discontinuation from the business,” added the official who preferred to remain anonymous.
Immediate cause of scarcity
There are seven local airlines whose financial fortunes are deeply hurt by the acute fuel supply problem. They include Arik Air, First Nation, Azman Air, Aero Contractors, Dana Air, and Air Peace. Industry sources said an estimated N300million is lost daily by these airlines due to rescheduled and cancelled flights.
Although aviation fuel has long been deregulated, thus allowing marketers to import and sell at prices determined by market forces, the immediate cause of the current acute fuel scarcity is linked to the inability of oil marketers to source for forex to import the product.
Spokesman for Arik Air, Mr. Banji Ola, told Daily Sun how helplessly operators had watched as cost of aviation fuel rose from N120 per litre to N175 and then to no fuel at all at the depots to buy.
“For the past week, the airlines had to face another round of aviation fuel scarcity which got worse over this weekend leading to many flight delays and cancellations,” said Ola.
“At the root of the fuel supply crisis is the low stock (at the depots) due to the inability of marketers to source foreign exchange to import more Jet A1 fuel into the country so that airlines can get fuel on a timely and consistent basis,” Ola added.
Daily Sun however learnt that aside the increasing inability of a lot of importers to open letters of credit due to inadequate supply of foreign currencies, the ongoing scarcity of kerosene has also forced most importers of Jet A1 to downgrade the product to sell it as Dual Purpose Kerosene (DPK) used as domestic fuel for homes at a price far higher than theN175 per litre sold to airline owners. Airline operators have therefore called on the Federal Government to step in and make forex available to marketers so the crisis can be brought to an end and the industry saved from imminent collapse.
Other causes and way forward
While high cost of forex or its scarcity may be at the root of the current Jet A1 scarcity, operators will tell whoever cares to listen that they are many other underlying factors hampering efficient and uninterrupted fuel supply to airlines. Chairman, Airline Operators of Nigeria (AON), Captain Noggie Megison, listed one of such factors as the import dependent status of the country on the product, as well as the cumbersome chain on the distribution and supply to airlines by marketers.
Megison also listed other reasons to include delays at seaport which usually translates into high demurrage paid by oil marketers, cumbersome and dramatic process of loading at the Apapa port and inefficient transportation of the product by road from the Apapa port to the Joint Users Hydrant Installation (JUHI) at the Lagos airport.
The AON Chairman said that some of the marketers he spoke to on the issue said their vessels get delayed for about two weeks to dock at the seaport and the cost to them could be as much as $20,000 paid as demurrage on the product per day while products are on the sea.
It is a continuous display of shame for Nigeria to be a net importer of JetA1 when it has raw crude oil in abundance. Megggison said government must take immediate steps to resuscitate the Aviation Turbine Fuel (ATF) at the Warri Refinery and the Pipeline –Hydrant system which supplied aviation fuel directly to the Murtala Muhammed Airport (MMA), Lagos.
Analysts insist that the day the NNPC commences the refining of about 80 per cent of Jet A1 in the country, the crisis in fuel supplies to airlines will end, just as air fares would also crash to a level where more passengers will flood the airlines. But when will that day come? Aviation fuel accounts for between 40 to 50 per cent of overhead of airlines in the country.
Megision who is CEO of JedAir, hinted that before the NNPC pipelines which pumped fuel directly to the airports were shut down in 1996, not one truck supplied fuel to the airports from any sea port but that fuel was pumped through pipelines to the airports.
The Nigeria National Petroleum Corporation (NNPC), he said should look at the possibility of reviving the pipelines, which obviously must have become rusty and corroded having been abandoned for more than 18 years.
According to him, “We need NNPC to revive this pipeline so that airlines can get cheaper and cleaner aviation fuel.”
Warri Refinery, he said has the capacity to produce aviation fuel.
The AON boss recalled that in the 70s, 80s and 90s, Nigeria used hydrant both at the defunct Nigeria Airways Limited (NAL) apron, the General Aviation Terminal (GAT), the International airport and Cargo ramp.
He said that it was sad that Nigeria allowed aviation fuel distribution in the country to deteriorate from digital to analog mode as he said it was a very primitive way to be using trucks and fuel bowsers to fuel airplanes in 2016, when 30 years ago the country used underground hydrant from the port directly into the tanks of aircraft.
Megisson said that until these issues raised are addressed ,the chances of airlines enjoying cheaper, cleaner, and uninterrupted aviation fuel in the country remain slim.