Shell Pakistan Ltd announced on Wednesday it’s going to discontinue its aviation operations across Pakistan.
The oil marketing company said in a regulatory statement to the Pakistan Stock Exchange that it was “no longer commercially viable” to operate in the aviation sector.
Currently, the firm operates its aviation-related activities from of four locations: Jinnah Airport in Karachi, Quetta International Airport, Begum Nusrat Bhutto Airport in Sukkur, and Nawabshah Airport.
The Pakistan Civil Aviation Authority (CAA) announced a joint tender for the operation of six airports, including Skardu International Airport and Gwadar International Airport, after the leases for these airports expired.
Oil marketing company claims that operating an aviation business is “no longer commercially viable.”
Shell Pakistan stated, “After due consideration of a variety of factors, including legal compliance, financial and commercial considerations, Shell Pakistan has taken the decision not to participate in the tender,” adding that the CAA will be consulted before communicating the exact date of departure from these airports.
However, according to the company’s most recent statement, “Shell Pakistan remains committed to continuing all of its other businesses and operations in Pakistan, which remain unaffected.”
According to Shell Pakistan’s most recent annual report, it served over 25 local and foreign clients and was the “second largest jet fuel supplier” in the nation.
Umair Naseer, associate director of research at Topline Securities, noted that fuel suppliers in Pakistan strive for higher volumes while maintaining low-profit margins.
According to the state-owned oil marketing corporation, Pakistan State Oil Company Ltd (PSO) will be the market leader in the nation for jet fuel with a share of 94.5 percent in 2020–21.
Given that PSO’s entire market share in the oil marketing sector is 51.4 percent, its share in the jet fuel segment is abnormally high.
Following the pandemic-related restrictions that curtailed foreign travel beginning in March 2020, jet fuel sales experienced a significant drop. As a result, according to the oil marketing company, the jet fuel industry decreased 32.4 percent in 2020–21 from the previous year, with PSO’s business decreasing 32.2 percent with a closing volume of 331.5 thousand tonnes.
PSO also obtained additional business in 2020–21 from foreign airlines and clients, including Virgin Atlantic, Pegasus Airlines, Istanbul Jet, British Airways, Air China, Air Sial, and Air Falcon, dealing a blow to its already insignificant rivals. Additionally, it exported jet fuel to meet NATO and ISAF needs.
“Inventory gains help oil marketing companies in Pakistan maintain profitability. The market for jet fuel has relatively low margins, according to Mr. Naseer.
Shell Pakistan informed participants in the stock market on Wednesday that its net profit for the quarter ending in June came in at Rs5.4 billion, increasing 26.8 times from the same period a year earlier.
Its half-yearly profit increased 3.5 times from the previous year to Rs7.5 billion.
According to a second news release from the company, the turnaround was fueled by better business performance concentrating on strategic goals including specialized fuels and lubricants and a positive modification in the government’s pricing formula for the indices priced by S&P Global Platts.