Fuel cost volatility hits aviation in Africa amid Middle East tensions

Airlines are grappling with soaring jet fuel prices as the US-Israeli war on Iran has caused a supply shortage - leaving consumers facing surcharges and airlines struggling to manage volatile costs as the fuel gets scarcer.

Africa is among the most exposed regions to both supply disruptions and higher prices. Around 70% of jet fuel and kerosene imports to the continent flow via the Strait of Hormuz, according to financial and commodities analytics firm S&P Global.

Since the conflict began in late February, shipping of fuel from refineries in the Middle East through the Strait of Hormuz has almost ground to a halt, removing roughly a fifth of global oil and liquefied natural gas supplies from the market.

"You fly to airports across Southern, West and East Africa and you negotiate prices on arrival," Jannie de Klerk, executive director of flight operations at South Africa’s National Airways Corporation, a charter business which also includes air ambulance services, told Reuters.

Fear of losses

"By the time you get there, the price has changed. If the war continues, availability will become a problem. The instability of (jet fuel) prices makes it very challenging to move around."

De Klerk cited a recent return flight from Lanseria to Cape Town via St Helena to collect a medical emergency patient, where jet fuel prices jumped by six rand ($0.355) a litre to R24/litre within 10 hours between the outbound and return legs.

"We now have to be very careful of how far ahead you quote for jobs otherwise you can quote short and lose money instead of making money," he said.

Jet fuel prices in north-west Europe have surged to record highs near $239 a barrel since the conflict began, according to LSEG data. Asian jet fuel prices are approaching $200 a barrel, close to recent records.

China bans fuel exports

African carriers feel those increases more acutely than most. Jet fuel typically accounts for between 30% to more than 40% of operating costs, compared with a global average of 20% to 25%, according to the African Airlines Association.

South African low-cost carrier FlySafair said in a statement jet fuel usually makes up 50% to 55% of its direct operating costs. The company does not hedge its fuel purchases.

At current prices, it estimates an additional cost of about R35,000 per flight hour ($2,071) for each of its 37 Boeing 737-800 in operation, which can do up to 165 flights a day. The airline said coastal airports in South Africa saw jet fuel prices rise by 70% in a single week.

Asia, while heavily reliant on the Strait of Hormuz, holds larger inventories than Africa and Europe, though some governments have moved to protect domestic supply.

China, the world’s top oil importer, has banned exports of diesel, gasoline and jet fuel until at least the end of March, sources said.