Air Peace, Others Maintain High Airfare Despite Cheap Fuel From Dangote Refinery
- Dangote Petroleum Refinery recently announced a drop in the price of aviation fuel and diesel to less than N1,000 per litre
- Travel experts said that the development is yet to impact ticket prices, which are yet to change
- An airline operator said airlines are unable to purchase aviation fuel directly from Dangote because it is not an authorised marketer
Despite Dangote Petroleum Refinery's announcement that it has lowered the price of aviation fuel and diesel to N980 and N940 per litre, respectively, air travel costs to local destinations in Nigeria have reportedly remained high.
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Ndukwe Ginika Ogechi, CEO of Geena Travels and Tours Ltd, confirmed that ticket prices have not been reduced.
He said:
“We still book tickets at a costly rate. All we just keep hearing is that aviation fuel prices have reduced, yet ticket prices have not changed.”
Ogechi stated that she had anticipated a decrease in ticket prices because aviation fuel accounts for a significant portion of an airline's operating expenses, but this has not happened.
Cost of operation increases
According to research, the cost of operating aviation fuel is currently about 45%; labour is at 17%; aircraft rent and ownership is at 8.5%; non-aircraft rents and ownership are at 7%; professional services are at 4.5%; landing fees is at 2%; food and beverage is at 1.5%; maintenance materials is at 13%; and transportation-related costs is at 1.5%.
Five years ago, when aviation fuel was less than N100 per litre, operating a B737 aircraft for one hour cost roughly $3,000.
Similarly, airlines operate a B737 aircraft for approximately $6,000 due to increased aviation fuel to N200 per litre.
Meanwhile, airlines run a B737 aircraft for more than four times that amount due to changes in the exchange rate and the cost of aviation fuel, which is now roughly N1,500 per litre.
A one-way economy class ticket from Lagos to Abuja, which cost N55,000 a few months ago, is now available for between N100,000 and N140,000 on Air Peace; N90,000 to N150,000 on United Nigerian Airlines; N75,000 to N130,000 on Dana Air; and N150,000 to N190,000 on Ibom Air, according to BusinessDay's research.
Previously costing roughly N50,000, a one-way economy class ticket from Lagos to Abuja now ranges from N105,000 to N150,000 on Air Peace, N95,000 to N130,000 on United Nigeria Airlines, and N165,000 to N200,000 on Ibom Air.
Also, previously priced at approximately N55,000, a one-way economy class ticket from Lagos to Port Harcourt now ranges from N105,000 to N170,000 on Air Peace, N85,000 to N120,000 on United Nigeria Airline, N65,000 to N135,000 on Dana Air, N96,000 to N130,000 on Ibom Air, and N86,000 to N160,000 on Arik Air.
BusinessDay's investigations reveal that the cost of aviation fuel was N629 per litre in July 2023, N818 per litre in August 2023, N897 per litre in September 2023, N930 per litre in October 2023, N991 per litre in November 2023, and N1,000 per litre in December 2023.
In January 2024, fuel cost experienced a further increase to N1,042 per litre, followed by N1,316 per litre in February and N1,500 per litre in March.
An airline operator said that marketers sell to airlines since Dangote is not an authorised fuel marketer at the airport, and hence, airlines are unable to purchase aviation fuel directly from Dangote.
Although fuel costs are not set, the operators stated that they are based on volume, with airlines that purchase more fuel receiving a specific discount.
On the other hand, he mentioned that a litre of aviation fuel often costs N1,500.
Read also
Marketers give reasons diesel will not sell for N950 despite Dangote refinery's price crash
Samuel Oyekanmi, a reesearch and insight associate with Norrenberger Financial Group said,
"The full implementation of Dangote Refinery is a potential growth propeller, however, it will take time before we start seeing the full impact on the economy."
Airline operator gives conditions to slash airfares
Legit.ng reported that given Dangote Refinery's impending delivery of aviation fuel or Jet A1 fuel, there are significant indicators that domestic aircraft carriers may lower passenger ticket rates.
Over the previous four years, domestic airlines were compelled to improve operations by increasing ticket rates due to the consistent rise in jet fuel prices.
On February 20, 2022, the twelve scheduled airlines—Air Peace, Aero Contractors, Arik Air, Max Air, Azman, Dana Air, Ibom Air, Green Africa, Overland, Rano Air, ValueJet, and United Nigeria Airlines—jointly decided to raise fares by 100% to cover operating expenses.
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Source: Legit.ng
