'It will directly impact on all the airlines'
FOR READERS concerned about the recent jump in petrol and diesel prices, more dismay.
Jet fuel is also going up by about 8%, according to Andrew Banks, SAA senior manager for petroleum affairs.
This will obviously directly impact on all the airlines' bottom lines, he said, with fuel the second highest cost after labour.
But SAA will try to make the price impact as minimal as possible, Banks added.
He is not very happy about this increase in a fuel which - in its use by airlines - is generating a lot of foreign exchange earnings for SA from business and holiday-making passengers.
Jet fuel is an unregulated product, said Banks, but we are still not allowed to import it on our own behalf. We've now had about four applications for import licences for jet fuel rejected.
This is because - like petrol and diesel - jet fuel prices in SA are calculated against a highly controversial formula to create what some people describe as a mythical IBC (in-bond landed cost). This uses the prices of petroleum products in Bahrain and Singapore as the basis of the SA import cost. With the addition for inland fuel users of a road transport cost, even though fuel is actually transported through Transnet's low cost Petronet pipeline from the coast.
We've taken all this up with government, said Banks. We are not happy with the IBLC structure as it refers to jet fuel - and pricing it on a similar basis to petrol fuels.
This is not the import parity we've been fighting for four years.
It's not as though the government makes anything out of these price increases. There's no tax on jet fuel although, according to Banks, this proposal is in the offing. We also object to this, he said, because the price in SA is already exorbitant.
This last statement is one agreed to by the other major airlines to whom FTW has spoken, with SA being described by one as a pretty expensive jet filling station.
There is no longer any logic behind retaining the IBLC formula, according to Banks.
It's a costly protective measure introduced by the previous Nationalist government in the dread days of sanctions.
But, said Banks, under the present circumstances, with SA now a welcome re-entrant to the global scheme of things, this artificial formula is no longer applicable.
The other difference is that - while jet kerosene fuel comes from a slightly more refined level of the distillation process of crude oil than standard household paraffin - it is an exception to other fuels.
It gains no revenue for the government. And, said Banks, if the jet fuel market was released, no real number of jobs would be at stake. Not like the possible 40 000 -
50 000 that could be at risk if other parts of the oil industry were deregulated, he added.
He reiterates the fact that cheaper jet fuel would increase tourism in SA. Which alone, he said, would be a big money generator.
Add to that the fact that it would also make other potentially big routes attractive for the airlines to fly.
This is apart from all the other cost benefits of cheaper fuel, Banks said.
The latest in the argument is that talks are being held, to look at import parity
pricing amongst other
things, Hein Baak of the
Department of Mineral and energy Affairs told FTW last week.
This Banks confirmed. The Department has appointed two individual consultants, he told FTW. One is looking at jet fuel pricing, and the other at transportation charges. We'll possibly get more clarity when they report.
