• Thursday, July 25, 2024
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BusinessDay

How Air Peace will shake-up competition in international routes leveraging price, service delivery

Coronavirus: How FG can help domestic airlines stay afloat 

Nigerian passengers are often worried about the cost of travelling to top destinations outside the country for summer, holidays, business trips and other important engagements. The average Nigerian still sees this as exclusively for the rich.

For instance, the average Nigerian may not be able to afford N400,000 to N500,000 for an air ticket to Dubai. An average family of four or five may have to set aside a two-year budget just to buy tickets for a trip to Dubai considering the economic situation in the country.

However, the narrative is gradually changing with Air Peace shaking up competition on the route since it commenced flight to Sharjah, United Arab Emirates (UAE) eight months ago.

The airline has continued to see very good patronage on the route as the airline offers passengers almost 53 percent slash in ticket price from its competitors

Despite the promo price on Emirates, BusinessDay’s checks show that a return ticket on Lagos-Dubai route using high-end airlines such as Emirates and Qatar Airways costs between N320,000 to N420,000,  compared to AirPeace which is offering its passengers between N175,000 to N200,000 for a return ticket on the same route. These high end airlines have since reduced the cost of tickets since Air Peace commenced operations on the UAE route.

This huge ticket reduction has seen more summer passengers book for tickets, as Air Peace currently records almost 80percent load factor on its flight to Sharjah.

Air Peace offers travellers from Nigeria the opportunity of connecting 23 other destinations from the United Arab Emirates. The destinations that could easily be connected from Sharjah international airport include: Riyadh, Madina, Jeddah, Beirut, Delhi, Colombo, Dhaka, Mumbai, Kathmandu, Moscow and several others.

In addition to this connectivity advantage, the airline provides buses to take its passengers from the Sharjah airport to the city.

While some stakeholders raised doubts on whether the carrier will survive on the route, especially competing with well-established carriers such as Emirates and Etihad Airways, the airline has defeated all doubts as Nigerians in the last eight months have continued to patronise the brand over its price, service and connectivity advantage.

However while admitting that he is aware that the challenges would be daunting, Allen Onyema, chairman, Air Peace restates that Air Peace is well prepared to ride the storm.

Onyema said: “Before you go into any business, you need to study the business and the environment. You have to know that airline business, for example, is a risky one. What are the factors that have made many airlines in Nigeria to fall by the way side? You really need to know where you are coming from; where the other airlines are coming from and what has been responsible for their failure.”

He revealed that Air Peace drew strength from the very strong support it continues to receive from its bank, Fidelity Bank, which he said “has been very supportive and it is because we pay back our loans.”

He said the airline’s driving force is to disprove the notion that Nigeria is a failure in the global airline industry. “We have decided to make the difference. We want to prove that we are different and that we are a very resilient people in Nigeria. We have very resourceful people. They have not been given that opportunity to rise; we are also contending with international aviation politics that is trying to bring Nigerian airlines down.

“So, we decided to do things differently, both in the way we run our affairs and in the way we expand. We decided to acquire the single-aisle planes for our domestic operations and we have acquired the wide-body planes for our international long haul flights,” Onyema added.

Expansion to other international destinations

While the airline flies frequently to Africa’s West Coast countries, Dubai is just one out of the many destinations Nigerians go to, there is therefore no doubt that the airline would also shake-up competition on other international routes it plans to commence using the right equipment, strategy and partnerships.

Apart from Sharjah, the federal government of Nigeria has given Air Peace six destinations to operate. These destinations include Mumbai, Guangzhou, China, Atlanta, Houston (US), Heathrow (London) and Johannesburg (South Africa).

Air Peace had earlier set a domestic record as the first Nigerian airline to acquire and register the Boeing 777 aircraft in the country. Three of the four wide-body aircraft it acquired for its long-haul operations have so far been delivered, as it hopes to increase its fleet size to 67 in few years.

Job opportunities

Apart from the advantage of price, service delivery and more choices for passengers, another very important advantage of having Air Peace represented in the international space is creation of job opportunities.

While foreign airlines employ few Nigerians and more of its indigenes as pilots, crew and engineers, domestic airlines are creating more job opportunities for Nigerians by training and employing them.

BusinessDay’s checks show that for every aircraft deployed on a route by a domestic airline, it creates over 300 direct and indirect jobs for Nigerians.

With over 12,000 jobs already created by AirPeace for Nigerians, the airline is sure to increase these numbers in the near future when it increases international flights.

Need for FG’s support

Onyema had earlier said in an interview that domestic airlines may not succeed in international operations without the support of the government.

He however commended Hadi Sirika, Minister of Aviation for making efforts to address multiple frequencies for foreign airlines, which implies that he wants the survival of indigenous airlines, adding that more needs to be done to address the issue.

According to him, “Government must discourage unfair competition.  The American government did the same thing for their airlines. The Gulf airlines brought unfair competition, the airlines in America complained and the American government stepped in and that stopped. Multiple and proliferation of designations to foreign airlines into Nigeria, multiple frequencies are disservice Nigeria

“When you land in America, they only allow you one more stop. If you land in New York and you want to go to Atlanta, you must use their local airlines to move about.”

He explained that when domestic airlines are protected, they create jobs, thereby reducing militancy, kidnapping other vices.

He reiterated that the private sector needs the enabling environment to create more jobs; and that is what Air Peace is doing.

“The more the airlines come up, the more jobs they provide for Nigerian people.  The sky is too big for all of us, if two airlines are doing UAE from here, two more airlines can do it from Nigeria also.

“If we don’t give opportunity for airlines in Nigeria to survive, they would continue complaining that airlines are not strong, and it hurts me. It hurts me when they say our airlines are not strong, that they are indebted. I am not indebted, but even if we are, we are servicing our debt,” he said.

Ado Sanusi, managing director, Aero Contractors told BusinessDay that government has to protect domestic so that they could compete with other airlines outside the country.

According to Sanusi, “We are not saying that they should ban all international airlines from coming but they should protect meaning that if for instance BA or Lufthansa are requesting for second frequency, we need to ask them which of the airlines in Nigeria they will be willing to partner with. Or if they want three frequencies, we must insist, they partner with domestic airline for cargo.

“These are the things we need to protect the industry and grow it. If you give multiple frequencies, it will be good for the customers flying out of the country but it is not good for the aviation sector. It is the same thing with the agricultural sector.

“The rice farming is going higher and in the next five years, we will specialise into different kinds of rice farming. So now you can see that we can now become proficient in this rice production.

“So, it is the same thing with aviation. If you tell international airlines seeking second frequency to partner with any local airline, you will now be creating more capacity for that airline. You are giving them opportunity to grow. I think this is the way forward for the aviation industry.”

John Ojikutu, a member of aviation industry think tank, Aviation Round Table (ART) and chief executive officer, Centurion Securities, listed some ways government could support domestic airlines.

First, Ojikutu said there should be a careful assessment of their business plans to ensure the airports designated for their operations are well equipped to support and sustain their day and night operations and even during inclement weather.

Secondly, he explained that government policies on open skies and commercial agreements with foreign airlines must limit their operations in domestic routes. He said concessions given to foreign airlines for multiple destinations must be reduced to two in different airports outside Lagos and Abuja.

“The foreign airlines incursion into domestic routes is seriously affecting the growth of local airlines,” he said.

Potential for expansion

Domestic airlines have the potential to expand if government can therefore create enabling environment for them to operate.

BusinessDay’s checks show that 39 foreign carriers operating in Nigeria realised over $3.1 billion dollars from ticket sales, up from $1.7 billion in 2018 and $1.7 billion in 2017.  This improved revenue based on the bilateral and multilateral air services Nigeria has signed with other countries shows the extent of funds repatriated to foreign countries.
Experts say these figures show that the travel market is indeed huge and domestic airlines can leverage government support to tap into this huge market.