Study Warns Against Plans To Cut ‘subsidy’ For Aviation Fuel

A government study warned against any plans to cut government subsidies for aviation fuel, which is 10% on prices for airlines that travel more than 5,000 fl ights a year, reports Al-Qabas daily quoting sources.

The sources attributed the reason for the possibility that the impact of raising prices is the government’s tendency to encourage the movement of air traffic at Kuwaiti airports.

The government provides financial support for aviation fuel prices, which is a 10% discount on fuel prices for eligible companies, as well as an additional 10% cash subsidy to the national airlines (Kuwait and Al Jazeera) through the Ministry of Finance for their total purchases of fuel bringing the support of the national companies to about 20%.

According to a government study, the prices of selling jet fuel in Kuwait are high compared to selling prices in other countries in the region and attributed the increase to several factors, including: demand for low fuel quantities at Kuwait International Airport increase the operating cost of KAFCO, the higher labor cost compared to the cost of regional supply companies at other airports, where the percentage of national manpower in the operations and maintenance department of KAFCO is about 93%. The cost of fuel is a major operating cost for airlines, estimated at more than 40% of total operating costs.

The amount of fuel supplied by airlines depends on the following factors: The price of selling fuel; Aircraft load; Distances/flight hours; Fuel tank capacity; and the amount of burning fuel/ hour. Sources said the airlines are pursuing an efficient management system for fuel price comparisons at airports, where they decide whether or not to refuel fully at each airport they use. The regional airlines can operate short-distance flights without refueling from Kuwait Airport if the price of selling fuel at the airport is not feasible.

Related sources pointed out that the total fuel subsidy provided by the government to airlines is estimated at KD 10 million, despite the issuance of a decision a short time ago to limit fuel subsidies to airlines whose flights exceed five thousand flights a year. Meanwhile, the total value of subsidies for ration and construction items in the month of March reached KD 22.8 million, reports Al-Rai daily quoting a reliable source from Ministry of Commerce and Industry.

He explained that value of the subsidy for food items including basic items and milk and children’s nutritional items was KD 13.1 million. The value of subsidy for construction items was KD 9.7 million. The total number of beneficiaries was about 2 million.

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