Nigerian airlines risk shutting down as jet fuel increases to N1,500 per litre

There are signs that the rising cost of aviation fuel, or Jet A1, may force certain domestic airlines to suspend operations.

The cost of aviation fuel has steadily risen for the past two years, forcing airlines to improve their operations by increasing ticket prices.

Due to the product's fluctuating price, local carriers struggled with a 109% price increase in less than eight months, notably between July 2023 and February 2024.

The nation's twelve scheduled airlines have continued operating despite the sharp increase in jet fuel prices, from N629 to N1,316.

Airlines to pack up

According to Vanguard, some airlines are considering ending their operations since the current state of affairs is unsustainable.

Jet fuel prices varied between N1,300 and N1,500, according to George Uriesi, Chief Operating Officer of Ibom Air, despite attempts to obtain the figure as of press time failing.

Uriesi said: “It is a massive challenge because fuel is a significant cost. In two years, it has gone from about N200 to N1,500. No matter how prudent an airline is, it cannot absorb that kind of increase in the significant cost input.

The increase is so massive that raising fares is difficult to attack fuel price essential. We think that we have reached the plateau in terms of using fares to absorb all these inflationary issues – the value of the naira and the increase in the price of fuel, which are the two most important components for a domestic airline.

“I think we have reached the zenith of how much we can charge higher for people to travel without stopping them from buying tickets. What I can say right now is that the recent strengthening of the Naira was just like an oxygen mask for domestic airlines because it had reached the point where it was no longer sustainable. I don’t think any other group of airlines in the world faces the challenges that Nigerian airlines face.”

In a conversation with Vanguard, Captain Ado Sanusi, Managing Director of Aero Contractors, cautioned that things might worsen if the nation did not begin refining Jet A1.

He said:

“Cost has been skyrocketing, and from the regular 35 to 40 per cent of airlines’ costs, it has now jumped to nearly 80 per cent. And in some cases, 90 to 95 per cent. It means when tickets are sold, 90 per cent of the ticket goes to buying Jet A1. It’s a direct relationship. When the price increases, the cost increases.

“Airlines increase the prices of their tickets and transfer the cost to the customer. Until we start refining jet fuel in the country, we will depend on imports. While we are depending on import, we are looking at the cost with a naira to dollar exchange rate. I don’t know whether Dangote and Port Harcourt refineries are equipped to refine Jet A1, but even if they are, it will take some time before we feel the impact.”

Sanusi added that the federal government should try to make the importation of jet fuel as transparent as possible, adding that it will help the airlines know what to expect in terms of price.