Supply monopolies and poor logistics make African aviation-fuel prices the highest globally – IATA

October 22, 2024 in Business, Companies, Trade & Industry, Transport, Travel & Tourism by Editor

African airlines continue to pay the highest prices for aviation fuel for any region in the world, driven mainly by the existence of cartels in the supply chain and logistical obstacles. This translates into higher operating costs for African carriers and less competitiveness relative to peers from elsewhere.

According to data compiled by international airlines lobby IATA, and shared in its chart of the week for October 18, 2024, on average, African airlines are paying into-wing prices for fuel that are 2.4 times higher than their North American counterparts, and 2.1 times what carriers from the Middle East, who have made huge inroads into the African market, have to pay for aviation fuel.

“Africa has the highest average into-wing fuel price globally, mainly due to limited supply competition, with governments or monopoly suppliers controlling the setting of into-wing prices at the airports in the region. Logistics challenges and limited access to the fuel systems are also responsible for the high prices,” IATA says.

The into-wing price is the all-inclusive cost an airline pays for fuel delivery to its aircraft. According to IATA, this cost varies significantly across regions and jet fuel typically constitutes the largest operational cost for airlines, currently around 30pc of total industry costs.

Given the peculiarities of the African market however, fuel can constitute as much as 50pc of operating cost for small African carriers that lack scale.

“Regions with higher fuel prices are disadvantaged in terms of their profitability and competitiveness,” IATA says adding: “Prices vary by region because of supply-demand dynamics at regional trading points. There are also sizeable regional variations in the add-on price, which comprises transport, storage, and into-plane fueling costs. This variability results from the lack of competition among suppliers and complexities in regional logistics.”

The airline lobby further explains that airports with reliable and developed supply chains and open access to their fuel infrastructure tend to have lower and more stable add-ons.

In contrast, Africa has the highest average into-wing fuel price globally, mainly due to limited supply competition, with governments or monopoly suppliers controlling the setting of into-wing prices at the airports in the region IATA explains.

According to the data, on average, airlines in Africa pay 647 US cents for a gallon of aviation fuel. That compares with 268cents for airlines in North America, 306 in the Middle-East, 388 in Europe, 432 in Latin America, and 542 in Asia and Oceania.

Logistics challenges and limited access to the fuel systems are also responsible for the high prices. Airports showing high into-wing prices in other regions generally face similar problems and challenges.

IATA notes that this disparity and the associated disadvantages are likely to get worse as the industry transitions from conventional fuel to greener fuels. “With unequal access to mature fuel supply chains, certain airlines are already at a clear disadvantage with conventional fuel. From now on, it will be imperative to give SAF suppliers access to airport fuel systems since, as a drop-in fuel, it uses the same infrastructure as conventional aviation fuel.

Regardless of their home base, all airlines should be able to participate on equal terms in the global SAF market, as they should in the global jet fuel market.”