Oil Marketers Raise Alarm, Accuse Airline Operators Of Trying To Force Subsidy On Aviation Fuel

Some petroleum products marketers have warned that the pressure being mounted by local airline operators on the federal government to begin arbitrary control of the price of Aviation Turbine Kerosene (ATK), commonly known as aviation fuel, was to force government to introduce subsidy payment on the product.

The allegation came as Nigerian airlines once again demonstrated inability to work together in pursuit of common goals, as they pulled out of an earlier agreement to ground their flights from today to protest increase in the price of aviation fuel, also known as Jet A1. The withdrawal forced the umbrella organisation, Airline Operators of Nigeria (AON), stop the plan.

In a related development, Chevron Nigeria, yesterday, announced the termination of its contract with Caverton Helicopters.

According to the oil marketers, if government yields to the pressure to control the price of aviation fuel by “fiat” and the Nigerian National Petroleum Company (NNPC) Limited begins to import and sell to the airline operators below the market price, the situation would lead to another subsidy and further compound the already bleeding economy.

The immediate past chairman of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Tunji Oyebanji, said this in a chat with THISDAY yesterday, after the earlier threat by the local airline operators to shut down their operations today, following the rise in the price of aviation fuel to N700 per litre, as against N190 sold previously, as the airline operators claimed.

Oyebanji stated that the airline operators were trying to force the federal government to start controlling the prices of aviation fuel by fiat. He said the only solution was for airline passengers to pay the appropriate price for tickets to enable the operators recoup their expenses.

Oyebanji said, “Airline Operators are trying to pressurise government to control prices by fiat. In the alternative, let people pay the appropriate price for airline tickets. Aviation is not a social welfare business. Why are international airlines that we also sell to, not threatening to stop flights?”

He wondered why the airline operators had not been able to proceed with their plan to import aviation fuel even after the opportunity was given to them.

Maintaining that the price of ATK followed the international price of the product and the exchange rate, the marketer said the cost of importing the product was high.

On his part, the current chairman, MOMAN, and Chief Executive Officer of Ardova Plc, Mr. Olumide Adeosun, told THISDAY that the Russia-Ukraine war, foreign exchange scarcity, inflation, as well as logistics and administration costs were major drivers of the rising price of aviation fuel at the international and local markets.

Adeosun said traders of the product at the international market were now putting premium on demand and supply and were selling their products to the highest bidder, making it difficult for them to import the product and sell at a cheaper rate.

According to him, “Russia controls over 30 per cent production. What we are seeing is that traders are putting premium attention on the price of aviation fuel because all of us are scrambling for exactly the same barrel.
“So, the traders are paying premium attention on demand and supply and they are selling to the highest bidders only. We should try and look at the financial factors and the predominant driver, look at all of the issues around storage cost, administration cost, and, of course, you have to think about where you are going to buy your next round of products from.”

Noting that the international carriers were not complaining that the price of ATK had gone up, as the hike affected everybody, Adeosun pointed out that, unlike the local operators, international airlines operated their business in ways that gave them long term security of product. He explained that the international airlines entered into long-term contracts, which allowed them to secure products supply for a long time and be able to pre-empt the price of ATK on a month-on-month basis.

Adeosun stated that in Nigeria, the airline operators basically bought on the days they needed to fly, stressing, “You cannot do that when your business is dependent on the availability of fuel. Aviation fuel is not like petrol for taxi. You are not driving Uber. So, this is a very serious business that requires strategic planning.”

On whether any of the airline operators had applied and secured licence to import aviation fuel, as they had said in February, the MOMAN chair said none of them had applied for the licence, to the best of his knowledge.