The cost of air travel is set to increase as airlines brace for higher fuel storage and handling charges, a move likely to impact passengers with higher ticket prices. The Energy and Petroleum Regulatory Authority (Epra) has announced an 8.6 percent rise in storage and handling fees for imported aviation fuel (Jet A-1), a development that will put further pressure on operating costs for airlines.
Starting in July, oil marketers will be required to pay KSh 563.92 per cubic meter for storage and handling, up from the current KSh 518.83. Additionally, the cost of loading trucks will rise by 5.3 percent, reaching KSh 400.09 per cubic meter from the current KSh 379.87. These increased charges will likely be passed down the supply chain, with airlines absorbing higher fuel costs that may ultimately be reflected in ticket prices.
Jet fuel is a significant component of airline operating expenses, often accounting for 20 to 30 percent of total costs. When fuel prices rise, airlines have limited options: they can absorb the additional costs, reduce other operational expenses, or pass the costs on to passengers through higher fares. Given the competitive nature of the airline industry and the already high costs of operation, the likelihood of airlines increasing ticket prices remains high.
Passengers flying on both domestic and international routes may feel the impact, particularly as airlines review their pricing structures. Budget carriers that operate on lean margins might find it especially challenging, as they often rely on cost efficiency to offer competitive fares.
The rising cost of aviation fuel storage comes at a time when global fuel prices are already volatile due to geopolitical tensions and supply chain disruptions. Increased airfares could have ripple effects on tourism and business travel, potentially reducing demand and affecting the hospitality industry. Kenya, as a major regional hub for air transport, could see shifts in travel patterns, particularly if passengers seek alternative modes of transport for domestic travel.
Cargo airlines will also face increased costs, which may affect freight charges. Higher transportation costs could impact supply chains, particularly for industries reliant on air freight for time-sensitive goods.
To cope with the rising costs, airlines may explore various strategies, including:
- Fuel Efficiency Measures: Investing in modern, fuel-efficient aircraft and optimizing flight routes to reduce fuel consumption.
- Operational Adjustments: Implementing measures such as reducing weight on flights, increasing passenger load factors, and adjusting flight frequencies.
- Negotiating Fuel Contracts: Partnering with suppliers for long-term contracts or hedging against price fluctuations to manage costs.
- Adjusting Pricing Strategies: Introducing flexible fare structures to accommodate changes in fuel prices without alienating budget-conscious travelers.
As fuel storage costs rise, stakeholders in the aviation industry will need to adapt to maintain profitability while ensuring air travel remains accessible. Whether airlines choose to pass on the cost directly to passengers or absorb some of the burden, the impact of these changes will be felt across the industry. Travelers should brace for potential fare increases, while businesses relying on air transport may need to adjust their logistics strategies accordingly.
