Removal of oil subsidy may affect air travel

The decision by the Federal Government to remove subsidy on petrol came to many as a surprise. For an aviation industry that is reeling under so many taxes, uncertainty, harsh business climate, this action would sure have serious impact on the sector. Agreed that aviation fuel, otherwise known as JET A1 had been deregulated, cost of operations which could double occasioned by the development could lead to adjustment in air fares to make up for lost revenue.

The fear stemmed from the impact the subsidy removal would have on service, products and possibility that air fares may increase.
Many predicated their fear on the fact the major oil marketers in Nigeria have formed a cartel, since the price of aviation fuel is not controlled by the government, they could also be forced to raise the price of the commodity to make sure that the price of JET A1 is not at par with the price of PMS.

JET A1 is sold for between N160 and N180 per on the place of purchase.
It is predicted that if the price of Jet A1 continues to be adjusted, air fare from Abuja to Lagos could be priced beyond N40, 000 before any airline can comfortably operate to recover marginal profit. It is almost coming to reality.
Early last year, precisely in January, the price of Jet A1, the dominant jet fuel used for most of the aircraft operating in Nigeria, was N111 per litre in Abuja. By the first week of March, the price had risen to N140 per litre.

On July 3, the major oil marketers in the country informed airline operators that the price of the same product was climbing in excess of N170 per litre. Therefore, in just over four months, the cost of buying Jet A1 increased by over 25 per cent without any sign of abatement.

It is interesting to note that aviation fuel gulps about 40 per cent of an airline’s revenue in a normal market where carriers can adjust ticket prices to balance their income.
Air passengers may initially resist the increase; there is the likelihood that they will adjust to the reality as there are no other safer and faster option of travelling within this country.