Aviation fuel explained: Why cheaper kerosene does not mean cheaper air tickets

The Kenya Energy and Petroleum Regulatory Authority (EPRA) recently lowered the maximum retail price of diesel by Ksh5 per litre, while leaving the costs of Super Petrol and kerosene unchanged. In Nairobi, Super Petrol will cost Ksh214.03 per litre, diesel Ksh217.86, and kerosene Ksh191.38. The review was backed by Ksh938 million in government fuel stabilisation measures, which prevented petrol and kerosene prices from rising despite changes in international oil prices.

Despite the apparent simplicity for motorists and families, the connection between fuel prices and airfare is more intricate. One prevalent misunderstanding is that airlines purchase the same kerosene sold at gas stations for their aircraft. Jet A-1, a specialized aviation turbine fuel crafted from kerosene, is the predominant fuel utilized by commercial aircraft.

Although Jet A-1 and regular kerosene are both kerosene-based petroleum products, they adhere to different specifications, quality demands, handling norms, and supply chains. This means the reduction or absence of an increase in the EPRA-regulated price of household kerosene does not automatically result in a similar decrease in the amount airlines pay for aviation fuel.

This differentiation is crucial when interpreting fuel-price updates. EPRA's monthly retail price review covers regulated petroleum products sold in the Kenyan market. The August 15–September 14 review established Nairobi's maximum kerosene price at Ksh191.38 per litre. Conversely, aviation fuel operates under a distinct aviation fuel supply system.

Its pricing is determined by elements such as international crude oil and refined-product prices, exchange rates, import expenses, storage, airport handling, and other supply-chain expenditures. Thus, Ksh191.38 does not represent the price airlines would anticipate paying for every litre of fuel loaded into an aircraft at a Kenyan airport.

This explains why equating the EPRA kerosene figure with an airline's fuel expenditure can lead to an inaccurate conclusion. Commercial passenger planes typically employ turbine engines that combust aviation turbine fuel. Jet A-1 is the principal aviation fuel utilized globally, engineered to satisfy rigorous standards as aircraft operate under vastly different conditions than road vehicles or domestic heating and cooking systems.

Essential Jet A-1 characteristics encompass its freezing point, energy content, combustion traits, cleanliness, and resistance to contamination. Aircraft might also function at altitudes where temperatures plummet to extreme lows. Consequently, aviation fuel must satisfy specifications guaranteeing its suitability for utilization throughout the flight.

Various factors come together to ascertain an airline's actual fuel cost. The first is the global price of refined aviation fuel. Oil is traded worldwide, implying Kenyan airlines are susceptible to international market fluctuations, even when their aircraft are functioning on domestic routes. Fuel is essentially tied to the dollar-denominated international oil market.

If the Kenyan shilling weakens against the US dollar, the local-currency cost of imported petroleum products can increase, even if international oil prices remain constant. Aviation fuel must be transported, stored, and managed under stringent safety and quality-control requirements before reaching an aircraft. At airports, this entails specialized infrastructure and protocols that incur additional expenses beyond the fundamental refinery or import price.

Even if aviation fuel were to become substantially less expensive, an airline would still confront numerous other costs. Hence, a modification in one input does not inherently produce an equivalent shift in the price of an airline ticket. For instance, an airline offering a Ksh10,000 ticket may not be retaining Ksh5,000 after accounting for fuel expenses.

The ticket price encompasses the airline's comprehensive cost framework, anticipated passenger demand, and market conditions.