BusinessDay
Nigeria's leading finance and market intelligence news report.

Green Africa disrupts airline business with cheap airfares

With insecurity driving more people to travel by air and the incessant surge in airfares as a result of depleting fleet and high foreign exchange, Green Africa, a new entrant in the Nigerian aviation sector, may cause disruption in airline business as it commences sales of tickets with airfares as low as N16,500.

From N28,000 for one hour flight after the high season in December 2020, the average cost of one hour ticket has now risen to N60,000 for one-way ticket and rising still as high as N80,000 for passengers who buy a ticket on the day they are travelling.

Airlines have continued to increase the price of tickets because they source foreign exchange from the parallel market at N500 per dollar.

This is also as operators point out that many aircraft that were taken out of the country overseas were yet to be brought back because of the coronavirus pandemic, which has hindered activities in most countries, so the Nigerian carriers have limited fleet but high demand for air travel, as insecurity continues to discourage many people from travelling by road.

With the 70 percent slash in airfares offered by Green Africa, stakeholders are concerned if these fares would be sustainable and if passengers would be willing to fly propeller aircraft instead of jet aircraft, considering how uncomfortable these aircraft can be.

“Actually, if I ran an airline in Nigeria, I would do exactly what Green Africa appears to be trying to do – target the mid-to-lower end of the market with cheap tickets by using propeller aircraft instead of jet aircraft.

“Up to 40 percent less fuel consumption so cheaper tickets. The trade-off is longer flight times and more in-flight turbulence since turboprops have lower cruising altitude (and turboprops are also noisier than jets). But in Nigeria, the deciding factor is always price,” David Hundeyin, a renowned writer, journalist and researcher stated via his twitter handle @DavidHundeyin.

Read Also: Green Africa commences flight tickets sales with fares as low as N16,500

He acknowledged that turboprops are less comfortable and take longer time than jets, adding that some aircraft type like the ATR72, which Green Africa uses are known to have tail rudder issues in severe icing conditions, but in our equatorial climate, that is unlikely to be a factor.

Hundeyin, who expressed his optimism in Green Africa’s business model, added, “Let people fly for N20,000 and you’re printing money.”

With Green Africa’s commencement of ticket sales, some airlines are already slashing fares.

For instance, airfares from Lagos to Abuja has dropped from N60,000 in April to between N25,000 and N35,000 now.

AirPeace slashed the airfare from Lagos to Ilorin from N52,500, some airlines charged last month, to N32,700.

Seyi Adewale, CEO, Mainstream Cargo Limited, told BusinessDay that N16,500 airfares was just a promotional fare by Green Africa to appeal to passengers not used to flying a propeller aircraft and who were yet to experience the airline for the first time.

“If Green Africa does not get people to experience their flights, they won’t be able to penetrate the market. People would be willing to fly the turboprops, as long as it is cheaper,” Adawale said.

He assured that after two weeks of offering promotional prices, Green Africa would begin to adjust prices to fit into current operational and economic realities.

Checks by BusinessDay show that the seat capacity for an ATR 72-600 aircraft that would be operated by Green Africa would take between 70 and 78 passengers, depending on the seat configuration.

John Ojikutu, aviation security consultant and secretary general of the Aviation Safety Round Table Initiative (ASRTI), told BusinessDay that the load factors of the small aircraft were lower, so they may not break even if they charge the same rates with airlines having bigger aircraft.

It cost airlines between $500,000 and $1 million to carry out mandatory C-checks on their aircraft every 18 months.

Checks show that it cost not less than N2 million to operate a one-way flight using a Boeing 737 aircraft. Aviation fuel cost about N220 per litre and operators would need not less than 8,000ltr (N1.7m) to operate a one way Lagos- Abuja flight. In addition, operators need to pay for landing and parking fees, ground handling fees, en-route air navigation services, catering, among others.

Aviation analysts say when airlines charge passengers less than N40,000 for a one-way flight, they are operating at a loss or relying on government intervention funds, palliatives or concession on recurring debts.

However, Tolu Odutola, a pilot and aviation expert, argued that Green Africa operates ATR 72-600, which are generally cheaper to maintain than the 737s, CRJs and other aircraft operated by local airlines.

Operations cost is generally cheaper and that is probably why ticket costs are commiserate, Odutola said, but noted that N16,500 fare may also just be an introductory rate to break into the market.

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