The cost of handling and storing imported aviation fuel (Jet A-1) will rise by 8.6 percent from July, in what could trigger an increase in the cost of air tickets as airlines pass increased fuel costs to passengers.
New charges that have been gazetted by the Energy and Petroleum Regulatory Authority (Epra) show that oil marketers will pay Sh563.92 per cubic metre as storage and handling fees from the current Sh518.83, marking a rise of 8.6 percent. The cost of loading trucks will also rise to Sh400.09 per cubic metre from July, reflecting a 5.3 percent increase from the current Sh379.87 for a similar quantity.
The rise in fees to be charged by Kenya Pipeline Company and private depots that handle Jet A-1 imports will likely trigger an increase in prices of aviation fuel, which will then be passed on to passengers in the form of more expensive tickets for local and international flights.
Airlines, including Kenya Airways and the budget domestic carriers such as Jambojet and Skyward Express, have in the past hiked ticket prices in response to increased prices of fuel.
“The effective date of the new tariffs will be the 15th February, 2025, and subsequent adjustments for the next tariff control periods will be on the 15th July, every year,” Epra Director-General Daniel Kiptoo says in the notice.
The new tariffs that will come into force next week will last until the end of the current financial year in June, after which the tariffs for the 2025/26 period kick in.
Fuel prices are one of the major factors that airlines use when setting ticket prices, underscoring why local and international travellers might be in for higher ticket prices.
The International Air Transport Association (IATA) says that fuel costs represent a third of the costs that airlines incurred last year.
“The tariff applicable for transit products and Jet A-1 shall be paid in United States Dollars while the tariff applicable for local products shall be paid in Kenya Shillings,” added Mr Kiptoo.
Kenya Airways had not responded to queries on whether it will adjust ticket prices in response to the looming increase in cost of aviation fuel.
Airlines are sensitive to fuel prices and quickly increase airfares whenever the prices of aviation fuel go up, for example when new taxes on the commodity kick in.
In 2023 local airlines hiked airfares following the doubling of Value Added Tax (VAT) to 16 percent.
Air tickets, especially in the local market, are also determined by the time of travel with morning and evening fares being higher than the afternoon ones.
The tariffs apply to the Kipevu Oil Storage Facility (KOSF), the Kenya Petroleum Refineries Limited (KPRL), the Vitol Tank Terminal International Kenya (VTTI) and Kipevu Oil Terminal, which are the facilities licensed to handle and store fuel.
Epra also hiked the handling and storage fees for aviation fuel meant for the transit market, with oil firms now set to pay $4.24 per cubic metre effective July from the current $3.9, in what is expected to trigger a rise in air ticket prices in the neighbouring countries.
The new tariffs are for a three-year cycle which will lapse in July 2027. Prices of aviation fuel are not controlled by Epra meaning that oil marketers unilaterally factor in any increased costs when setting prices of aviation fuel.