• Friday, May 24, 2024
businessday logo

BusinessDay

Making Nigerians benefit from the price wars on the Lagos-London route

Airfares rise for summer travellers on N460/$ naira rate

Following Air Peace’s lead, airlines on the lucrative Lagos-London route have slashed their fares by over 50 percent. Their action dispels the falsehood they peddled about the impossibility of charging the kind of fares Nigerians considered reasonable and possible on the route. Significantly, they have now offered rates below what even Air Peace offers.

Q: “Air Peace’s entry caused a paradigm shift that has pressured established airlines to be more competitive. It offers significant cost savings for travellers on the route.”

Air Peace significantly reduced the fares on the route, offering economy-class tickets for N1.2 million and business-class tickets for N4 million. It led to a competitive response from other airlines. Foreign carriers like British Airways, KLM, Egypt Air, and Ethiopian Airlines are opening lower ticket inventories for Nigerian travellers.

All the major airlines now offer less than N2 million for a return economy ticket, down from an average of N3.5 million. For flights on April 29, 2024, fellow African carrier Ethiopian Airlines provided a rate of N679,375 to London against Air Peace’s N1, 090, 072. Other airlines also brought their fares closer to Air Peace’s.

This competition has brought more affordable options for travellers on the prime Lagos-London route. It has also confirmed the route as one of the most lucrative in global aviation. However, the route was hobbled by uncompetitive pricing over the years due to the absence of an indigenous carrier.

The Lagos-London route has the same six-hour flying time as the New York-London route. But passengers on the Lagos-London route paid three times as much before Air Peace’s debut.

There are many pros and cons to the price wars on the Lagos-London route.

The advantages include reduced fares for passengers. Reduced airfares are the most immediate and noticeable benefit. Air Peace’s entry caused a paradigm shift that has pressured established airlines to be more competitive. It offers significant cost savings for travellers on the route.

There is now increased competition. Price wars can stimulate competition in the aviation industry, leading to better service and amenities and potentially more passenger flight options. Nigerian Air Peace passengers are still salivating about the cuisine that caters to the Nigerian palate.

Air Peace’s success would boost Nigerian aviation. It could inspire other Nigerian airlines to expand their international reach. Such moves can strengthen our domestic aviation industry overall.

Lower airfares on this critical route could lower pressure on the naira. This is a significant consideration given that the value of the naira was one of the factors that triggered the runaway fares. The federal government hopes that by offering a competitive Nigerian option, fewer travellers will need to use foreign exchange for flights, thus stabilising the Naira.

The price wars pose several challenges and disadvantages. One is the fear of unsustainable practices, where airlines may cut costs so low that they cut corners on maintenance or reduce staff training to maintain low fares. Such practices could compromise safety standards in the long run.

Price wars can lead to financial strain on airlines, as razor-thin profit margins make it difficult to invest in new aircraft, technology, or staff development. Moreover, price wars can create an unpredictable market environment, making it difficult for airlines to plan for the future and discouraging investment in the aviation sector.

Price wars can lead to potential job losses. Airlines may resort to job cuts to save costs if they struggle financially due to price wars.

The price wars on the Lagos-London route are a double-edged sword. While passengers benefit from lower fares in the short term, the long-term impact on the aviation industry and safety standards remains to be seen. Airlines must balance offering competitive prices with maintaining a sustainable business model, prioritising safety and quality.

Significantly, Nigerian officials must pay keen interest in and attention to developments on this route. We must be alert to aeropolitics and the bureaucratic, economic, and other dimensions and significance of the Lagos-London route in international diplomacy.

Much history and geopolitics go into the Lagos-London route. All the activities around the March 30, 2024, Air Peace inaugural flight to London show that it is not a mere travel route but one with more profound significance. Nigerian officials must keep their eyes on the ball at all times. Air Peace Airline must also brace up for the stiffest competition in its operations since its inception in 2013.

The federal MDAs in Aviation, Trade and Industry, and Foreign Affairs may consider developing and enacting a competition policy for players on the route. Competition is “a significant predictor of productivity growth within nations.” Encyclopaedias say, “Competition bolsters product differentiation as businesses try to innovate and entice consumers to gain a higher market share and increase profit.”.

May Nigerian travellers gain all the benefits of the competition without suffering its cons. All parties must aim for a win-win.