Bridging fare gap, stemming exploitation

The unblocking of lower fare inventories by foreign airlines has elicited joy among travellers as the stability or volatility of the naira will now go a long way to determining appropriate pricing and eliminating exploitation, WOLE SHADARE writes

Front burner

Airfare increase on Nigerian routes has been on the front burner for more than two years. Fare disparity, however, took a different dimension when many of these foreign carriers capitalised on our indiscretion to keep their over $700 million proceeds due to foreign exchange scarcity.

The trapped fund kept piling up from $100 million until it rose to nearly $80o million; a situation that caused huge embarrassment to the country.

Nigeria topped the list of countries with huge indebtedness to airlines. Airlines trapped fund in Egypt was $348 million; Algeria ($199m); and Ethiopia $128 million in January 2024, excluding Venezuela’s $3.8 billion stuck in the crisis-stricken country since 2016.

The International Air Transport Association (IATA), the umbrella body for over 300 global airlines, did not fail to take a swipe at the country including the threat of leaving the country.

Their threat generated so much interest in the country that the Central Bank of Nigeria (CBN) entered into discussions with the airline body on how to defray the huge cost. Unknown to many commentators, most of the airlines’ money was with the carriers’ commercial banks while a fraction was with the apex bank.

Frustration

While the carriers were left frustrated for many years in retrieving or repatriating their funds, they reasoned that their monies would have lost value because of the devaluation of naira against the dollar. They were left in disarray and confused about what to do.

They tinkered with the idea of selling tickets in dollars which the CBN flatly refused and considered a violation of Nigerian law which forbids business transactions in any other currencies except the naira.

Some of the carriers were very smart as they clandestinely sold tickets in dollars while also accepting ticket purchases in naira at the dollar equivalent.

The carriers cancelled all lower ticket inventories, especially for travellers from Nigeria. The policy cancelled all lower ticket purchases and online opened the highest prices, which invariably made fares as high as N3 million and N4.5 million for Economy class from Lagos to London, for instance.

Business class tickets skyrocketed to between N10 million and N12 million forcing many who could not afford the high fares but who are desperate to travel to journey to neighbouring countries in Ghana, Benin Republic and Togo, which offer cheaper fares and about half of the fares charged by the airlines from and to Nigeria.

Defence

The explanation or the defence by some so-called experts on why fares are higher in Nigeria compared to Ghana or other neighbouring countries cannot justify the questionable price regime, which makes Nigerians pay more than twice what is charged for the same class of tickets in those countries.

The distance between Nigeria and Ghana does not justify the wide disparity in airfares from the two countries to Europe. There is also no level of disparity in airport charges that can justify the gap. The discrimination against Nigeria smacks of sheer exploitation.

Nigeria was the highest loser as the country lost huge traffic to these countries while also depleting revenues that would have accrued to aviation and by extension to the country.

NCAA, NANTA struggle pay off

All that seems to be over now that the National Association of Nigerian Travel Agents (NANTA), spearheaded by its President, Mrs. Susan Akporiaye, and heavily backed by the Nigerian Civil Aviation Authority (NCAA) compelled the airlines to comply with the opening of their lower ticket inventories.

NANTA and IATA had in the first week of February 2024 held a strategic meeting on the release of lower ticket inventories following the release of the airlines’ trapped funds by the CBN.

Akporiaye had before now viewed further restriction of lower inventory as excessive, profiteering, and unsupportive of the Nigerian government/market in the face of economic challenges.

She reiterated the firm position of NANTA, stressing that with ROE at N1421 and backlogs cleared by CBN, airlines have no further reason and justification to restrict inventory in the Nigerian market.

“We at NANTA view further restriction of lower inventory as excessive, profiteering, and unsupportive of the Nigerian Government/market in the face of  economic challenges,” she stated.

Akporiaye disclosed that NANTA had requested IATA to prevail on all airlines operating in the Nigeria market to release all lower inventories by February 2, 2024, reminding IATA that NANTA was cooperative and collaborative when the request was made by IATA.

She said: “Anything short of full release of inventory by all airlines is now unexplainable. We view that there is more to the actions of airlines in our market.”

Compliance

Virtually every airline has complied with many opening as many of the six out of ten lower inventories with just about two yet to do so.

Due to the reopening of the inventory, passengers can purchase tickets at the rate of N1.2 million and N1.5 million, as opposed to what we used to have before.

Aviation Metric learnt that British Airways, Lufthansa German Airlines, KLM, Egypt Air, Ethiopian Airlines, Royal Air Maroc, RwandAir, and Turkish Airlines had all released all categories of low inventory tickets while Air France has failed to comply with the directives.

After NANTA’s threat, the NCAA set up a 10-man committee on the heels of a two-day high-level meeting with foreign airlines in Nigeria on the urgent need to unblock all low inventory tickets which were hitherto blocked for over 18 months.

The 10-man committee chaired by Director of Special Duties, NCAA, Mr Horatius Egua, is charged with the responsibility of ensuring that the foreign airlines fully comply with the directives of the government to unblock all low inventory tickets as well as recommend appropriate pricing of tickets in Nigeria compared to similar markets in the West African sub-region.

The implication of this, according to experts, is that high fares would drop but they warned that it would not make a huge difference because of the devaluation of naira against the dollar. They welcomed the efforts put in by both the aviation regulatory body, the NCAA and NANTA which they say is the right step in the right direction.

While airlines may have unblocked their lower ticket inventories, it may not solve the escalating ticket prices unless the naira is stable.

It is becoming increasingly difficult to source funds to pay for tickets. Projections could be off the mark because of the fluidity in the change of fares.

Depending on destination and route, airfares have increased so suddenly and this is impacting seriously air travel.

“Economy ticket from Lagos to London used to cost about N450,000 in 2021 but increased to about N1.2 million in 2022 and in 2023 rose to N2.5 million and N3 million. Also, business class tickets rose to about N6 million during the same period, depending on the airline and time of booking. This increased to N10 million and N12 million. This has the potential to increase further unless the naira stabilises,“ said a business traveller.

The intervention of the NCAA and NANTA may have yielded positive results as many of the advertised fares to London from Lagos oscillate between N1.2 million and N1.4 million including the new entrant Air Peace which is expected to debut on March 30, 2024, to London Gatwick.

The stability of the naira in recent weeks has helped in large measures to bring down fares to a relatively affordable rate.

Last line

Ultimately, however, Nigeria must work towards the provision of an environment in which indigenous airlines can thrive and compete favourably with foreign carriers on all routes to force down fares.

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