Rising cost of jet fuel could spark high airfares

If you are planning to travel anytime soon, domestic and international airlines may require you to pay a slightly higher fare to help cover the rising cost of aviation fuel (Jet-A1)

The rising cost of aviation fuel (Jet-A1) in some parts of Africa, including Ghana, could lead to an increase in the fuel surcharge component of the price buildup of air tickets in the medium term to keep airlines in the business.

Jet A-1 prices are up by around 30-40% in May relative to January, driven primarily by a shortage in the refined product due to the removal of Russian crude supply from the global markets. On the international market, jet fuel prices ended last week up 1.1% selling at US$$176.3/bbl.

Experts say an increase of 10-15% in average fares paid by travelers is inevitable, as airlines have to increase revenues to keep up with the increase in jet fuel prices this year.

In Ghana, which imports all of its aviation fuel despite being an oil-producing nation in Africa, jet fuel is selling for about US$1.2 per liter compared to US$0.65 in January.

This translates into an increase of US$ 0.55, representing an 84.6 percent increase in the price of the commodity since the turn of the year.

In Nigeria and South Africa, the cost and availability respectively of aviation fuel are major issues.

In oil-rich Nigeria which currently imports almost all of its aviation fuel due largely to local refinery challenges, the price of the commodity has increased from US$0.46 to US$1.69 (N190 to N700) per liter in months.

A planned indefinite suspension of domestic air services was only averted on Monday, May 9, 2022, after the Speaker of the country’s House of Representatives intervened, engaged all stakeholders and succeeded in getting the price of the commodity reduced to US$1.16 (N480) per liter for three months.

Sean Mendis, an international aviation consultant, portends that the struggle with access to jet fuel at whatever price due to the removal of a big chunk of Russian production capacity from the market portends that this could lead to higher airfares in the medium term.

He tells AviationGhana that: “The reality is that fuel accounts for 30-40% of an airline’s operating costs, so with the 30-40% increase as well in the fuel cost, that means a 10-15% increase in the cost for an airline to transport each passenger. As a result, airlines have no real option in the medium to long term than to increase their prices accordingly. The issue in Africa is not just the fuel price, but the actual shortage of the physical commodity in some places even for airlines willing to pay.

“Johannesburg for example is unable to meet the demand of the airlines flying there, forcing them to divert to Durban or Windhoek or Harare to fill up their tanks – all this has additional costs and those inevitably get passed on to passengers directly as increased fuel surcharges or indirectly through higher fares,” Mr. Mendis added.