• Thursday, July 18, 2024
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BusinessDay

Price war on London route takes off as foreign airlines slash fares

Competition on the popular Lagos-London route has intensified, with foreign airlines slashing fares, some even undercutting Air Peace Airline, the only Nigerian carrier on the route.

An economy class return ticket on British Airways (N1.6 million) now costs a million naira less than that of Air Peace which charges N2.6 million. Ethiopian Airlines charges N1.66 million, Asky charges N1.7 million, Qatar Airways N1.9 million, Royal Air Maroc N2.4 million. Each one charging less than Air Peace.

A Business Class return ticket on Air Peace however costs less than the price of the foreign airlines at N3.8 million. Royal Air Maroc charges N4.9 million from business class passengers, Turkish Airlines N5.4 million, Ethiopian Airlines N5.8 million, British Airways N6.4 million and Qatar Airways N6.9 million.

BusinessDay previously reported a significant drop in airfares from Nigeria to other countries, attributed to the naira’s appreciation and increased competition from Air Peace’s new Lagos-London route. Air Peace began flights on March 30, 2024, and has been fully booked by Nigerians seeking cheaper tickets to London.

The airline set its economy class ticket at N1.2 million, effectively reducing fares on the route.

As of Tuesday, the International Air Transport Association (IATA) rate for ticket sales in Nigeria dropped from almost N1,800 a few months ago to N1,505 to a dollar.

These factors have seen the prices of tickets drop on the Lagos-London route.

A one-way economy class ticket from Lagos to London on British Airways which cost N3.5 million for Economy and N11 million for Business Class a few months ago has seen a sharp drop to N605,000 for economy and N7.6 million for Business Class.

Other airlines that had pegged their tickets between N3.5 million to N2.5 million have also reduced fares, with some airlines currently selling lower than Air Peace.

As of Tuesday, a one way economy class ticket on Qatar Airways sold for N870,000, Ethiopian Airways N892,000, Royal Air Maroc N983,000, Air Peace N1,010,000, Asky N1,150,000 and Turkish Airlines N1,190,000.

The reverse is however the case for Business Class ticket as Air Peace remains the cheapest for this ticket class, as it sells for N2.5 million, Royal Air Maroc N2.6 million, Ethiopian Airlines N3,6 million, Qatar Airways N3.7 million, Turkish Airways N3.9 million, Air France N7.5 million and Lufthansa N10.6 million.

British Airways’ Premium Economy class ticket cost N2.7 million, and Business Class N7.6 million.

Olumide Ohunayo, industry analyst and Director, Research, Zenith Travels told BusinessDay that apart from Air Peace’s presence on the Lagos-London route which has seen airlines reduce fares, the price war is also in anticipation of the arrival of Emirates Airlines in October.

“Emirates is an airline that has strong dominance in the international route and 98 percent of their passengers are going to destinations beyond Dubai. So they have come to give European airlines competition,” Ohunayo said.

According to him, the European airlines are now reacting with price, service and offers such as lounges and even promo fares.

While this price war continues, he advised Air Peace not be rigid with what they are offering.

“They need to have a team that is studying the market and the offers and they will need to provide such offers to their passengers. This is about seat and capacity that is being offered to Nigerians as Nigerians have been flying these other airlines.

“Air Peace needs to show some balancing with what they are offering. Air Peace must watch what the competitors are offering in terms of lounges, excess luggages, amongst others. I am happy Air Peace has been given a greater schedule till March next year. With this, people can do their bookings ahead,”Ohunayo said.

Susan Akporaiye, former president National Association of Nigerian Travel Agencies (NANTA) told BusinessDay that all airlines have now opened up low inventories.

Akporaiye said the release of inventory has created competition, making almost all airlines prices at the same range.

She argued that the reason some airlines have cheaper tickets than Air Peace is because Air Peace has sold all its cheap tickets and the classes of ticket it now has is selling for more than N1 million.

“Air Peace said they have sold out seats till September. This means they are doing very well. It is after September that we will know. After last week, we got a circular that Air Peace has opened up their availability up to March next year.

“If sales from Air Peace’s side is not much, it is because the cheap fares have been sold out. What is now available are tickets of over one million naira, which makes it more expensive than the other airline because the other airline still has cheap tickets. Air Peace has sold all their cheap ticket classes,” Akporaiye said.

The former NANTA president also hinted that the exchange rate has also contributed to slashing fares.

“What determines the amount of tickets in naira is the rate of exchange. At the time when economy class tickets were selling for 5 million to 7 million, these were the highest economy when low inventories were closed.

“When the exchange rate was between N400 and N600 to a dollar, the highest economy class ticket sold between N2 million to N2.5 million. When the rate of exchange went as high as N1,800 to N1,900, that was when the same ticket of N2.5 million went to about N7 million,” she said.

She argued that the release of cheap ticket inventory was happening at the same time the rate of exchange was coming down.

“Airlines released low ticket inventories and the rate of exchange came down. Two things were happening at the same time. Airlines released low ticket inventories and at the same time, the rate of exchange was coming down. When they released all their inventories and rate of exchange came down to N1,200 to a dollar, that was when we were seeing N800,000 to N1 million ticket rates to London,” Akporaiye said.

John Ojikutu, industry expert and the CEO of Centurion Aviation Security and Safety Consult, Nigeria said he had earlier predicted that Air Peace’s commencement of Lagos-London flight would bring about competition on the route.

“This is the beginning of the competition for scrapping the exploitation of the foreign airlines on the Bilateral Air Service Agreement (BASA) routes. We hope those in the administration of our government and the management of the agencies will give the necessary support to Air Peace,” Ojikutu said.

He suggested that, like Mexico, the federal government should restrict foreign airlines to operating only at Lagos or Abuja airports to foster healthy competition.

“Let foreign airlines make as many frequencies as they wish daily but they must interline with the domestic airlines,” he said.

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