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One Week to Christmas: Jet A-1 Scarcity Choking Aviation Sector

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  • One Week to Christmas: Jet A-1 Scarcity Choking Aviation Sector

Ubong Williams, who resides in New Jersey, in the United States was penultimate week on a short trip to Nigeria to attend to some family issues.

Before his arrival in the country, Williams had requested a relative to purchase an Arik Air return ticket on the Lagos-Uyo route, as he was scheduled to spend a number of days in Uyo, Akwa Ibom State.

He had his first taste of disappointment from the indigenous airline when the first leg of the trip, which was to be aboard Arik Air flight W3 616, from Lagos to Uyo, on November 28, was rescheduled from 10am to 12pm “for operational requirements.”

After 13 days in Uyo, Williams was to return to Lagos State on December 11, so as to catch his Virgin Atlantic flight the following day to the United States.

But on Friday, December 9, the airline had communicated a three-hour rescheduling of the flight to him, via a text message. Again, the rescheduling was blamed on “operational requirements.”

However, at the Ibom International Airport, in Uyo, on Sunday December 11, Williams was shocked to find out that there was no one at the Arik Air counter. Having arrived the airport two hours ahead of the expected take-off of Arik Air flight W3 617 to Lagos, he thought he was too early for check-in and so drew himself a seat.

Before long, words started filtering in that the flight may have been cancelled owing to scarcity of aviation fuel, which is hitting the country for the umpteenth time this year.

Williams who had been joined by other Lagos-bound passengers was growing increasingly frustrated with the lack of information, and knew nothing about the scarcity of aviation fuel. Alas, at 3:12pm, he got a text message from the airline that the flight, which was to take-off at 3:10pm, had been rescheduled for the next day.

Now livid with rage, Williams and all other flustered would-be passengers on that flight had to explore other ways of furthering their movements, having been abandoned at the airport by Arik Air.

While some of the aggrieved returned home or to hotels as the only other Lagos-bound flight by Dana Air was fully booked, Williams was much concerned about getting to Lagos, in order to catch his flight to the States, in order to catch up with appointments there, and to escape a $200 fine for “no show.”

“I could not believe my eyes as I read the text message from the airline informing me of the flight cancellation minutes after the flight was supposed to be airborne. This shows how we are in this country and the long distance we have left to cover. I will speak to my counsel concerning this development in a few days,” a bitter Williams said.

Williams was not alone in this dilemma. Another passenger who identified himself as Eze, also vowed to extract his pound of flesh from the airline, irrespective of the reason he was left stranded in Uyo.

“I feel pained that in other parts of the world where one has travelled to, issues like this seldom crop up. Whenever they do, the passengers are always very well handled. Unfortunately, here the airlines think they are doing their passengers a favour. We’ll see who blinks first,” he fumed.

In the last one year or thereabouts, airline operators, both domestic and international have not had it rosy getting their required daily volume of aviation fuel to facilitate scheduled operations.

Aviation fuel, otherwise called Jet-A1, is a specialised type of fuel used to power aircrafts and ordinarily accounts for over 40 per cent of total operating cost of an airline.

Jet-A1 is 100 per cent imported, and the process is subject to fluctuations in the foreign exchange market.

In the last 12 months, it has steadily climbed from N104 to N240 per litre in Lagos, and as high as N270 in the northern parts of the country. The implication is that local airlines now have to spend more on fuel, or look elsewhere like their foreign counterparts are doing.

According to Regional Manager, North, West and Central Africa of South African Airways (SAA), Ohis Ehimiaghe, there has been no Jet A1 fuel in Nigeria in the last 12 months, and even the little available has completely dried up in the last two weeks.

SAA is one of the foreign airlines that pick passengers in Nigeria and flies to Kotoka International Airport, Accra, Ghana to refuel. But in the last one week, Ehimiaghe confirmed, supply is fast drying up in Ghana, due to heavy traffic.

The manager said that for long, airlines have been battling the scarcity even as its non-availability for several months now has done incalculable damage to their operations.

He added: “In the last two weeks, there has been total dryness of aviation fuel supply in the country. So, we have to go to neighbouring countries, especially Ghana to lift fuel. The commodity is also running dry in Ghana too. Even though there are times when we have fuel in abundance, but the times we don’t have it at all are more than the times we do.”

Finding an alternative airport to lift fuel constitutes an additional cost to airline operations, apart from the inconvenience that comes with it.

“We are fortunate that South Africa Airways has huge operations in Ghana, so it is easier to get our ground handling company and staff to service our operations quickly. Our Abuja flights have been flying by Libreville to lift fuel. This is an additional cost to our operations,” Ehimiaghe pointed out.

The effect of fuel scarcity appears to hurt domestic operators severly. Arik Air, for instance, operates the largest fleet in West Africa. With 28 aircrafts and about 100 flights per day, the airline’s operations have been worst hit nationwide.

Spokesman of the airline, Banji Ola, informed that with a daily fuel need of about 500, 000 litres, the outfit is the most affected by the scarcity.

“As a result of the worsening supply situation of the aviation fuel, Arik Air had announced further reduction in flights from Wednesday, November 16 to cope with the fresh scarcity, and reduce the unpleasant delays and cancellations, which passengers have experienced in recent times,” Ola said.

Industry sources have it that most airlines have scaled down their operations by 50 per cent due to scarcity.

Chairman of the Airline Operators of Nigeria (AON), Captain Nogie Meggison, said it was high time the Federal Government stepped into the matter, to forestall total collapse of the aviation sector.

Meggison said that the consistent non-availability of the commodity in the past weeks for airlines to conduct their operations has taken a debilitating toll on the industry.

According to him, “We have been forced to cry out about the perennial problem at this juncture because it continues to put us in a difficult situation of going the extra mile to fulfill our obligations to our esteemed customers, in spite of the inconveniences that go with it.

“However, we are at the mercy of oil marketers and many times our hands are tied such that we are left with no other option than to cancel flights,” Meggison said.

The chairman said despite the shortage of Jet A-1, the marketers have been increasing the price consistently to an unbearable point.

“Till April this year, I bought Jet A1 Fuel for N105 a litre. About a month ago, the price jumped to N145. Two weeks later it rose to about N200 per litre. Today, the price has skyrocketed above N200 a litre. This has greatly increased our operational cost.

“For instance, considering that the cost of fuel accounts for about 40 per cent of the operational cost of most airlines, the colossal rise in the price of the product by over 100 per cent has equally increased the operational cost astronomically. In the light of this, our feasibility studies and financial projections are greatly threatened, thereby putting the airlines in a dangerous and difficult financial position,” Meggison lamented.

While some of the airlines blame the marketers for the scarcity, the marketers say the scarcity of foreign exchange should be held responsible.

Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Olawole, attributed the shortage of aviation fuel to difficulty in sourcing dollars, stressing that the foreign currency is often not available to importers on fairly affordable interbank market rate.

Olawole said that his members were doing their best to make the product available in the country, but for inadequate support from the key government agencies.

General Manager and Chief Operating Officer at CITA Aviation Fueling Company Limited, Olasimbo Betiku, added that besides the forex scarcity, the sector is facing the consequence of years of negligence of basic infrastructural development and getting the refineries functional.

He, however, expressed optimism that with current efforts of stakeholders and plans to revive Kaduna and Port-Harcourt refineries to refine Jet-A1, the sector may soon be out of the woods.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Oil 1

Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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