Nigeria: Oil Marketers Raise the Alarm, Accuse Airline Operators of Trying to Force Subsidy on Aviation Fuel

 

Some petroleum products marketers in Nigeria 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 Monday 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), to stop the plan.

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 on Sunday, after the earlier threat by the local airline operators to shut down their operations on Monday, 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.

AON Aborts Plan to Suspend Flight Operations

Meanwhile, in a statement issued on Sunday, AON announced the suspension of its plan to halt operations. The statement was jointly signed by AON President, Alhaji Abdulmunaf Yunusa Sarina; Executive Director, Max Air, Alhaji Shehu Wada; Chairman, United Nigeria Airlines, Dr. Obiora Okonkwo; CEO, Arik Air, Capt. Roy Ilegbodu; CEO, Aero Contractors, Capt. Abdullahi Mahmood; MD, Azman Air, Alhaji Faisal Abdulmunaf; and Chairman, Air Peace, Mr. Allen Onyema.

The statement read, “Further to numerous calls from the highest echelons in government with promises to urgently intervene in the crises being faced by airlines due to the astronomic and continuously rising cost of JetA1, that the AON has acceded to requests to withdraw the action for the time being while we allow for a fresh round of dialogue with government in the hope of reaching an amicable solution.”

The airline operators also stated that they “reached this decision with the highest consideration for our esteemed customers who have been faced with uncertainty over the last few days and to enable them to have access to travel to their various destinations for the time being during the period of discussions with relevant authorities.”

They said, “In the interest of national economy and security considerations, AON hereby wishes to notify the general public that the earlier announced shutdown of operations on May 9, 2022 is hereby suspended in good fate pending the outcome of hopefully fruitful engagement with government.”

But before AON issued the statement, majority of Nigerian domestic carriers had suspended the plan to stop flight service from today. Leading the pack was Ibom Air, which on Saturday, broke off from the agreement and announced that it would continue operation.

Dana Air followed and said, in a statement signed by its management, that it had obligation to its customers and, therefore, would not stop operation on Monday.

Green Africa never indicated intention to join the airlines that wanted to embark on suspension of flight operations. But Aero Contractors and Arik Air issued a statement indicating their plan to continue with their flights. Overland Airways announced that it was opting out of the plan to stop operation.

Dana Air, in its statement, explained, “While Dana Air agrees with the Airline Operators of Nigeria (AON) on all the challenges facing domestic airlines in Nigeria and have on many occasions actively participated in the collective and ongoing engagement of relevant authorities on the urgent need to tackle the many issues domestic airlines have been grappling with, which includes the skyrocketing cost of Jet A1, we have taken a decision not to join the suspension of flights on May 9, 2022.”

In a joint statement, Arik Air and Aero Contractors said, “The management of Arik Air Limited (In Receivership) and Aero Contractors (In Receivership) wish to bring to the notice of the traveling public that both airlines will be operating all their scheduled flights on Monday, May 9, 2022.”

It was only Max Air, Air Peace, and Azman Air that held on until AON issued a statement suspending the plan to ground airlines operations from Monday.

Minister of Aviation, Senator Hadi Sirika, commended the airlines for suspending the planned suspension of flights. In a statement signed by Special Assistant to the Minister of Aviation on Public Affairs, James Odaudu, Sirika said since members of the AON issued the notice of withdrawal of flight services as a result of rising cost of Jet A1, and in spite of the initial statement by the ministry, enquiries had flooded the ministry. It said some had thought the withdrawal of flight operations was a kind of protest against the government.

The statement said, “We wish to state that the decision of the association is purely a business one as they are private businesses reacting to market forces but appealing for interventions to enable them carry on with their operations.

“The ministry has always made conscious efforts to assist members of the Airline Operators of Nigeria, some of which includes facilitating a meeting between the association and Mr. President, during which the association got several concessions, including duty-free importation of aircraft, engines, spare parts and components.”

It also stated that the minister had at various times personally took members of the association to engage with Central Bank of Nigeria (CBN) to sort out issues of access to forex for their operations and also the NNPC to explore ways of ensuring the availability of aviation fuel.

However, the plan by labour unions in four aviation agencies to embark on two-day warning strike on Monday and Tuesday, May 9 and 10, over the non-implementation of the Minimum Wage Consequential Adjustment, still stands, THISDAY has learnt.

General Secretary of the National Union of Air Transport Employees (NUATE), Ocheme Aba, confirmed on Sunday that there had been no development to stop the plan and the strike would still go on.

The Association of Nigeria Aviation Professionals (ANAP); Amalgamated Union of Public Corporation, Civil Service Technical and Recreational Services Employees (AUPCTRE); and NUATE issued a statement at the weekend, saying despite their best efforts, the issue of the Conditions of Service of the Nigerian Meteorological Agency (NiMET), Nigerian Airspace Management Agency (NAMA), Nigeria Civil Aviation Authority (NCAA), and Nigerian College of Aviation Technology (NCAT), as negotiated for upwards of seven years, remained with the National Salaries Income and Wages Commission (NSIWC) and the Minimum Wage Consequential Adjustment remained unimplemented since 2019.

Aba added, “All workers in NAMA, NCAA, NiMET and NCAT are hereby directed to embark on a two-day warning strike on May 9 and 10, 2022. Should the warning go unheeded, an indefinite strike shall be called soon afterwards. However, workers in all aviation organisations, including FAAN and AIB, are hereby directed to support and operate with the unions to assure full compliance and success of the strike.”

Aviation Fuel: House Calls Off Planned Emergency Plenary Session

The leadership of the House of Representatives cancelled its planned emergency plenary session slated for Monday, to discuss critical issues of national importance relating to the ongoing crisis in the country’s aviation sector. Clerk to the House of Representatives, Dr. Yahaya Danzaria, had on Saturday issued a circular calling on all members of the House, legislative staff, the media, and the general public to note that the House was going to reconvene by 2pm on Monday, to deliberate on the said matters.

But in a new circular, the House, through the Clerk, reversed the decision to sit on Monday, as earlier announced, citing, “near resolution of critical issues in the aviation industry.”

It stated that the leadership would, however, meet with industry stakeholders to deliberate on the way forward.

The new circular read, “I am directed to inform all Hon Members, staff, media, and the general public that the House hereby cancels the emergency plenary session earlier scheduled for tomorrow 9th May 2022.

“This cancellation follows from the near-resolution of some of the major critical issues in the aviation industry that necessitated the original notice. The House appreciates the positive concern, reaction, and contributions of all Hon Members to these critical national issues.”