..Airlines deploy price, other strategies
• As Air Peace triggers new competition
By Chinelo Obogo
The Nigerian travel market recently witnessed two significant developments. The immediate past President of the National Association of Nigeria Travel Agencies (NANTA), Susan Akporiaye, told Sunday Sun that the first was the Naira appreciated marginally, and secondly, the Air Peace, Nigeria’s largest carrier, launched direct flights from Lagos to London with the most competitive fares on the route.
These two factors, she said, influenced the crash of airfares by other dominant foreign airlines.
However, some industry analysts believe that the price reductions may be strategically motivated to push out Air Peace from the Lagos-London market.
They also said that the development has raised concerns about past pricing practices by foreign airlines, which suggested exploitation of the Nigerian travellers.
Lagos-London, Nigeria’s most lucrative route
An aviation analyst, Sean Mendis, said that travel market data indicate that Lagos-London is the dominant route for Nigerian travellers, with passenger traffic exceeding half a million last year.
This dwarfs the Accra-London route, which sees approximately 200,000 passengers annually. Thus, competition for a market share among airlines has always been historically intense. Given this, the recent 25 per cent increase in capacity on this route is likely to impact on airlines looking for passengers who are price-sensitive.
Exploitation
In the period leading to Air Peace’s inaugural Lagos-London flight on March 30, 2024, airfares remained high on that route.
Between January and February this year, the British Airways offered a one-way economy class ticket on the Lagos-London route for approximately N3 million, the business class fares priced at N11 million, while a one-way economy class ticket from Lagos to London on Lufthansa cost N3 million and N9 million for business class respectively.
Similarly, Virgin Atlantic sold its economy ticket for N2 million, economy premium went for N5 million, while business class tickets sold for N12 million.
Akporiaye told Sunday Sun that the reason for the high fare was because international airlines had blocked their lower inventories in Nigeria due to the fact that at the time, they were unable to repatriate their funds from the sale of tickets in Nigeria which had accumulated.
Due to this problem, travel agents were forced to divert sale of tickets to neighbouring African countries like Ghana because the average Nigerian traveller could not afford to buy at such an exorbitant rate, causing a 40 per cent loss of travel market share for the country.
When Nigeria’s Air Peace launched direct flights from Lagos to London, it pegged round-trip economy fare at N1.2 million, which significantly undercut the previously prevailing market rates charged by foreign airlines.
This strategic move by Air Peace clearly impacted the travel market, prompting foreign airlines to reduce their average round-trip economy fares to N1.4 million the following week.
Coincidently, British Airways also dropped its price for economy tickets to ($787.99) ₦981, 848; Virgin Atlantic ($927.99) ₦1.1m; Royal Air Moroc ($456.99) ₦569,422; Egyptair ($470) ₦585,620; RwandAir ($545.35) ₦679,070; Ethiopian Air ($543.84) ₦677, 824; Turkish Airlines ($647.84) ₦807, 408; Air France ($915.99) ₦1.1m; and KLM ($927.84) ₦1.1m.
A travel consultant and former President of NANTA, Bankole Benard, trying to explain what was at play, said that historically, Nigerians have travelled to two primary destinations: Dubai and London.
However, recent visa restrictions have limited travel to Dubai making London the dominant route for Nigerian travellers.
He said that previously, foreign airlines established airfares for this route with minimal competition, but that the introduction of direct flights by Air Peace has significantly impacted the market.
Unlike other airlines, Air Peace eliminated layovers in other countries, offering a more convenient travel option and this has forced more established airlines to re-evaluate their pricing strategies to remain competitive.
Stronger naira, increased competition reason for crash in airfares –Akporiaye
However, Akporiaye told Sunday Sun that while Air Peace’s arrival has shaken things up, the exchange rate played a crucial role in the drop in flight ticket prices, particularly with foreign airlines.
“There has been a drop in the cost of flight tickets, but it is because of the exchange rate and not because of Air Peace. I see a lot of people attributing the drop in prices solely to Air Peace, but it is not exactly true. I would not lie to you to favour anyone.
“I don’t particularly like what foreign airlines are doing, but I would not say what is not true. The drop you are seeing with other foreign airlines is because forex has dropped. It used to sell for N1,800/$1, but it is now N1, 300/$1. The same class of tickets which used to sell for $1,000 at the time that the rate of exchange was N1,808, exchanged for N1.8 million, but now that exchange rate is N1,300, flight ticket has gone down to N1.3 million, but the $1,000 still remains. It has not dropped.
“I know that the news of Air Peace commencing London routes must have encouraged them few weeks before Air Peace started its London operations, the Nigerian Civil Aviation Authority (NCAA) called for a meeting with NANTA, foreign airlines and other stakeholders and the purpose of that meeting was for them to release the lower inventories and most of the foreign airlines released the lower inventories which was the fallout of our meeting.
“I agree that Air Peace entering the London market would contribute, but this downward review of prices is mainly because of the rate of exchange. Tickets are priced in dollars and the rate of exchange is what we pay in naira. I would not challenge the Air Peace chairman when he says they are responsible for the reduction in the cost of air fare because we have promised to support them, but the truth is that prices of airfare have not been reviewed. What is happening is the effect of the exchange rate.
“The only thing that is happening which is the truth is that some of the airlines started doing promo for their business class, because Air Peace came with N4 million, so airlines started doing promo for theirs for N4.5 to N5 million. That is the aspect we can say is as a result of Air Peace entering the London market,” Akporiaye said.
Predatory pricing
The Chairman of United Nigeria Airline (UNA), Prof. Obiora Okonkwo and spokesperson of the Airline Operators of Nigeria (AON), described the crash in the cost of tickets on the Lagos-London route as ‘predatory pricing’ and not a price war as many described it.
He said that international operators are engaged in anti-trust practice, which he described as a criminal offence, accusing them of conspiring to push out Air Peace out of the market.
He said: “What is happening is very clear. Nigerians should not misunderstand price war to a clear conspiracy to push out Air Peace from the lucrative route. The foreign airlines have made adjustments to their pricing and I see some of them as predatory prices. These are prices that they have conspired to crash, which is lower than that of Air Peace to make sure they get back passengers. Nigeria is a big country and even if Air Peace flies five times daily, they can’t take all the passengers to London, so that would have been enough consolation for the foreign airlines to remain where they are if they meant well. But this is predatory pricing, it is not a price war.
“This is what they are doing; they would lower their prices because they have a longer staying power. British Airways can easily write off $50 million loss to keep Air Peace out of the market and they would not take a hit because they can go and get $1 billion loan at zero interest rate or even at one per cent. What it means is that Air Peace would be flying and losing money for months. They have their obligations to the banks at 30 per cent interest rate. If this unfair business practice continues, the airline would be out of the market in no time. When Air Peace goes out of the market, or United Nigeria that is definitely joining soon, then they will go back to their old prices.
“So, I am calling on the Nigerian government to watch out because there is what we call ‘anti-trust’, which is the process of deploying certain strategies to undermine the competitive capacity of your competitor, is what is going on. They should be called to question. How do you drop your fares from N3 million to N1.3 million? Even though Nigerians are rejoicing over it, there is an element of economic sabotage. The Nigerian government needs to interrogate this. If you do that in the United States, you would be called for questioning. What is going on is that they want Air Peace and any prospective Nigerian operator that would ply that route, to go out of business. This is not in good faith. The Nigerian government must have to protect our national interests.”
Somewhat agreeing with Obiora, a Houston, Texas-based Nigerian, who sought for anonymity, given the strategic role he is playing to birth a new Diaspora funding initiative designed to support a major effort to significantly upgrade the digital communication infrastructure in the Southeast, to boost Internet penetration that will position the geopolitical zone to benefit from the global digital economy, urged Nigerians to rise to the challenge thrown by the foreign airlines.
He said: “For too long, we have been ripped off by the predatory business practices of foreign companies operating in Nigeria. We all recall how the first mobile networks told us they could not give Nigerians per second, which at the time was already being enjoyed in many oversea countries. The per minute billing rip off persisted until Globacom gave us opportunity to ‘Glo with Pride’ by giving us per second billing.
Thank God that Nigerians massively supported Globacom by acquiring Glo sim cards and patronising the network’s services. Mike Adenuga and Glo did not disappoint Nigerians. We showed great patriotism to support our own. That is what citizens of other countries do. Donald Trump despite all his other flaws has made his “America First” message to resonate with a huge population of Americans who make up the MAGA Movement.
“I want to urge Nigerians to support Air Peace, to sustain this patriotic move it has made to bring back the Green-White-Green to the Lagos-London route, which the defunct Nigeria Airways proudly flew until mismanagement killed it. Nigerians must fight off the attempt of the foreign airlines to ‘colonies’ our wallets through predatory airfares that will drive Air Peace out of the Lagos-London. We must fight for and plant our national feet on the Lagos-London route.”
Air Peace fights back
An aviation expert, Amos Akpan, told Sunday Sun that it was expected that established airlines like British Airways and Virgin Atlantic would employ various strategies to compete with Air Peace on the lucrative Lagos-London route.
He, however, advised Air Peace to avoid publicly discussing the tactics used by competitors and maintain its focus on a well-defined plan while responding strategically to the evolving situation in the market.
He said: “British Airways and Virgin Atlantic will use whatever they have to make sure Air Peace does not take over their share of the market on the route. This is expected. What arsenals they deploy is left for the regulators in both countries to ensure all parties act within acceptable norms.
“It must be mentioned that countries have their template for the strategies they deploy in this kind of fight. Which agencies and groups they use are properly briefed and they know the steps to take when the war to capture, to retain, and to protect the market starts. They don’t mention the tools like airport authority, handling companies, aeronautical services providers; each knows what role to play while remaining professional in their approach.
“My advice to Air Peace and the Nigerian aviation agencies is to avoid making public comments about the strategies and tools deployed to execute the ‘war’. Just act according to your script in response to what is happening in the field. The airports in the UAE and UK knew what to do to frustrate Air Peace, they didn’t make it look like their national agenda, and they did not wait for their ministers to announce it as policy.
“Air Peace knows what to do in this scenario. They have maintained integrity, sincerity of purpose, and displayed proof of capacity. They have tried not to give the host country’s authority reason to reject their participation in the route. This has worked so far.”
To its credit, Air Peace has employed a counter-strategy by using its home advantage in its favour, a move that has been applauded by many Nigerians.
While foreign airlines are limited to the major international airports in Nigeria (Abuja, Lagos and Port Harcourt) for the Lagos to London operations, Air Peace has begun offering seamless travel to London from any of the domestic airports within Nigeria.
This means that, for instance, a passenger who lives in Owerri, can conveniently book a single ticket for the entire journey, starting at the local airport in the state and connecting to its direct flight to London at the Lagos international airport.
At a recent function in Lagos, the Chairman of Air Peace, Allen Onyema said that the airline would ensure a smooth travel experience by providing complimentary transfers between a passengers’ arriving domestic flight and the departing London flight in Lagos.
He also said that the airline needs the support of Nigerians to sustain the newly launched London service.
“For every penny you pay to Air Peace, you pay to sustain the jobs of thousands of Nigerians and support economic growth. Air Peace flies you from any of our domestic routes to London. So, you can fly from Yola to London via Lagos. From the local airport, you are taken to the international airport free of charge with a seamless luggage transfer,” Onyema said.