International and local airlines operating in Nigeria are facing a tough time as the present government policy to limit the use of first class and business class tickets by ministers, permanent secretaries and some heads of parastatals, reduces revenues, inside sources say.
This is in line with the government’s expectation of a 20 percent reduction in air travel expenditure, as the figure of N64 billion expended on travels in 2015 by government officials is considered outrageous.
Speaking with select journalists after a special event hosted by the Lagos Business School (LBS) at the weekend, Kemi Adeosun, Nigeria’s Finance Minister said government is determined to embark on cost cutting measures that would involve direct bulk purchase of tickets from the airlines, as government plans to reset the country’s economy, with her ministry as the arrow-head.
Adeosun said the efficiency unit in the ministry has made some strides, including “reduction of procurement opaqueness within FGN, providing cost savings guidelines to the government and additional innovations will be unfolded in the next few months, such as online procurement system for travel, basic goods and other services- using vetted suppliers and a clear accounting /approval system.
“Also, the airlines’ predicament is further aggravated by preferences of most travellers for economy class tickets in consonance with the present economic realities.”
However, experts in the aviation sector say this development may affect airlines’ revenue, especially foreign airlines which charge an average sum of N2million on their first class section, for trips outside the country.
“I noticed that the first class seats at the Virgin Atlantic a few days ago were empty, while the business class and the economy class were relatively full, unlike what we had before now, where the first class is usually full,” a frequent traveller on the Lagos-London route who craved anonymity, told BusinessDay.
Our source said the business class of a British Airways flight was likwise virtually empty about three weeks ago, when he travelled on the airline.
Kola Olayinka, British Airways commercial manager, told BusinessDay that though the government policy is affecting airlines, especially international airlines, they have to comply with the policy in good faith and see how else to make revenue to cushion the effec.
“Anything that changes the equilibrium of customers will affect us. But this is a government’s decision and we have no choice in the matter. We have to go back to the drawing board and see how else to re-strategise,” Olayinka said.
He added that despite the government’s policy, business men and women who previously flew with British Airways first class have remained loyal to the brand because of what the airline offers them.
Femi Adeniji, Chief Operations Officer, Tropical Arctic Logistics Ltd, a helicopter Logistics firm told BusinessDay that government’s policy on reducing travel expenses is a good gesture, as it will reduce unnecessary expenditure and wastages and will enable the government to raise funds to addressing more pressing issues in the country.
Adeniji however, explained that if the airlines involved are able to re-strategise properly, the effect might just be minimal. “The first class and business class are minimal to the economy class. The business people can still travel first class if they have the money and value the advantages accrued to flying first class,” Adeniji said.
In the same vein, experts in the aviation sector say the current forex policy of government, and resulting shortage have caused an unparalleled increase in airfares from Nigeria to other countries and the effect may stunt the growth of the industry.
They say airlines have increased fares to cushion declining sales and strains from the FX scarcity. However, such a move has resulted in a further decline in demand from passengers, even as the status quo is clearly unsustainable.
BusinessDay checks reveal that British Airways which had previously charged about N350,000 or less for an economy class return ticket from Nigeria to London, when the exchange rate was N150 to a dollar, now charges N834,976.
Furthermore, Virgin Atlantic, which previously charged below N300,000 for a Lagos – London economy class return ticket, now charges N801,796 while Arik Air, which plies local and foreign routes, charged a sum of N400,000 for the same destination.
British Airways and Virgin Atlantic which had previously charged below N500,000 for a premium class return ticket from Nigeria to London, now charge N939,756, and N903,006 respectively.
Passengers travelling business class on the same route are seeing similar increases as British Airways and Virgin Atlantic which charged below N1,000,000 now charge N1,946,916, and N801,796 respectively.
Wole Shadare, an expert in the aviation sector observes that most corporate bodies and individuals who typically flew first class, now fly business or economy class as a result of the spike in airfares.
“I usually take business class when I travel to the United States for business but ever since the increase in airfares which I am reliably informed is as a result of the shortage in forex, I decided to fly economy because I cannot afford the fare,” Bimbo Ogungbe, a traveller from Lagos to the United States told BusinessDay yesterday.
Ogungbe further said if the situation persists, she might have to reduce the frequency of her travels and find less expensive ways to conduct her business.
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