HomeAviation#Airlines Set To Reduce Fares As MAN Sees Inflation Easing

#Airlines Set To Reduce Fares As MAN Sees Inflation Easing

HEADLINENEWS.NEWS correspondent reports that this is as Manufacturers As­sociation of Nigeria (MAN) said on Tuesday that the crashing of diesel price by Dangote Refinery will have far-reaching effects in critical sectors like industrial op­erations, transportation, logistics, and agriculture, contributing to easing the high inflation rate in the country.

Dangote Refinery had on Tuesday announced a crash in the price of Jet A1 to N980 and diesel to N940 per litre.

This reduction by Dangote Pe­troleum Refinery marks the third major reduction in diesel price in less than three weeks when the product sold at N1,700 to N1,200 and also a further reduction to N1,000 and now N940 per litre.

Presently, Jet A1 is sold at be­tween N1,180 to N1,400 per litre, depending on the airport an air­line is buying from and the fuel marketer.

But the airline operators said that the new rate unveiled for Jet A1 by the refinery may not be for the operators, rather for the avia­tion fuel marketers, saying that the new price was yet to reflect in their buying rate.

Jet A1 is the major component of airline business, gulping about 40 to 45 percent of operating cost.

Capt. Ado Sanusi, the Chief Executive Officer (CEO), Aero Contractors, said that aviation fuel was the major component cost for airline operators.

He explained that in a free economy any drop in the price of the product would reflect in air tickets, but said this may not have immediate effect on the airlines until the aviation fuel marketers exhausted their current stocks.

According to him, as of Tues­day, the product was still being sold to the airlines by the market­ers at between N1,180 and N1,300 per litre, depending on the airport an airline is buying from.

He, however, described the re­duction of the price of the prod­uct as a welcome development.

He said: “If it is true that Dan­gote Refinery is selling at N980 per litre, it will definitely come to the market in a few days. So, we will still receive the old stocks being sold at old prices before the prod­uct hits the market. When it hits the market, there will be some adjustments.

“Naturally, in a free economy, this would translate into the tick­ets being recalculated to reflect the price of aviation fuel. That is in a natural free market economy. Now, the eco-system we operate in, in this country, there are so many other forces.

“I might not be surprised if the crashing of the price doesn’t di­rectly relate with the price, which we are buying Jet A1. However, I believe everybody will recalculate its prices according to the price of Jet A1, which is the main compo­nent in airline business.”

Some of the forces that may not drive down the price of air tickets, according to Sanusi, are foreign exchange and demand and supply.

He expressed that if the pas­sengers are comfortable with the current fares, some of the airlines may not immediately drop the airfares, but believes that on the long run, there would be some reduction in air tickets.

Also, a management staff of a foreign airline who didn’t want his name in print, said that the op­erators were yet to get an official report from Dangote Refinery on the crash of aviation fuel.

He regretted that the price of the product had consistently in­creased in recent months despite the drop in exchange rate.

The source explained that air­lines operate on direct operating cost (DOC), noting that once the DOC reduces, the price of air tick­ets would also crash.

He maintained that the recent crash in the exchange rate also reflected in airfares, noting that all the airlines, especially foreign carriers file fare rates with the Nigeria Civil Aviation Authority (NCAA).

“The price of the product is going up daily. There is nowhere the price of aviation fuel is lower than N1,400 per litre. If it doesn’t come to the users, where is the price crashing? I can’t take my aircraft to Dangote Refinery. The fuel has to come to the airport for me to get the product at cheaper rates,” the source said.

Segun Ajayi-Kadir, Director General of Manufacturers As­sociation of Nigeria (MAN), told HEADLINENEWS.NEWS correspondent that MAN is enthused by the commencement of operations by the Dangote Re­finery and quite commendably, the difference the company is already making in the Nigerian economic landscape.

He said: “The economic gains being recorded as a result of its operations reinforces our posi­tion on the need to support and incentivise domestic production and Nigerian industrialists.

“MAN, therefore, extends hearty congratulations and commends Dangote Industries Limited for fully commencing production and for the remark­able achievement in reducing the price of Automotive Gas Oil (diesel).

“The decision of Dangote Refinery to first crash the price from about N1,750/litre to N1,200/ litre and now to N1,000/litre is an eloquent demonstration of the capacity of local industries to positively impact the fortunes of the national economy.

“The trickle down effect of this singular intervention prom­ises to change the dynamics in the energy cost equation of the coun­try, in the midst of inadequate and rising cost of electricity.

“The reduction will have far-reaching effects in critical sectors like industrial operations, transportation, logistics, and agri­culture, contributing to easing the high inflation rate in the country.

“It is evident that domestic production holds the key to our economic recovery. It also un­derscores our assertion that the government cannot go wrong with incentivising domestic man­ufacturing and intentionally re­dressing the binding constraints that limit the actualisation of the potential of the sector”.

Dr. Muda Yusuf, Director/ Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), in chats with HEADLINENEWS.NEWS correspondent, said: “What is unfolding with regards to the Dangote Refinery and the tum­bling price of diesel underscores the value and significance of do­mestic production.

“It also exemplifies the beauty of resource based industrialisa­tion.

“It additionally reflects the na­tionalistic disposition of indige­nous industrialists. This is why we must give them necessary support.

“Evidently, Aliko Dangote has aligned with the commitment of President Tinubu to tackle the current cost of living crisis. There is therefore a dimension of patrio­tism to the pricing dynamics that we are witnessing.”

Yusuf, who emphasised that there is also a reciprocity angle to this development, said: “The government offered to supply crude to Dangote Refinery in do­mestic currency which is more favourable than selling in dollars.

“This naturally must have had a positive impact on output cost for the refinery.

“The lesson is that we should support local industries and demonstrate much greater com­mitment to backward integra­tion.

“This is a more sustainable pathway to industrialisation because incentives to manufac­turers should not be perceived as revenue loss because of the en­during impact on development and self-reliance”.

The Nigeria Employers’ Con­sultative Association (NECA) commended the Dangote Refin­ery for further crashing the price of diesel.

The Director General of NECA, Adewale Smatt Oyerinde, stated that Dangote Industries re­main a true symbol of the resil­ience and doggedness of Nigerian businesses.

He said: “This singular ac­tion has the potential to affect the whole business value and supply chain.

“The crash in the price of diesel and jet fuel will have un­imaginable positive impact on the cost of production, job creation and reduce pressure on forex and also increase the opportunity for many businesses to spring up along the value chain.”

Speaking further, the Director General stated that this singular act has further demonstrated and affirmed Dangote Industries as the foremost and dependable ally in nation building.

“The new price is in conso­nance with the company’s com­mitment to cushion the effect of economic hardship in Nigeria,” Dangote Group Spokesman, An­thony Chiejina, said.

The 650,000 barrel-a-day Dan­gote plant is readying two units to enable gasoline output that will transform the fuel market both in Nigeria and the region, according to analysts.


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