• Monday, May 27, 2024
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BusinessDay

Fares on Lagos-London route further drop as airlines deepen price war

Airfares rise for summer travellers on N460/$ naira rate

Foreign airlines operating from Lagos to London have continued to drop their fares since Air Peace commenced operations on the route.

Airlines such as British Airways (BA), Virgin Atlantic, Qatar Airways, Ethiopian Airlines and others have continued to slash fares on the route as competition is seen to drive price war.

BusinessDay had earlier reported that air fares from Nigeria to other countries have seen a significant drop, following the appreciation of naira and the competition arising from Air Peace commencement of Lagos-London route.

For over a year, the naira has continued to depreciate, leading to a rise in the International Air Transport Association (IATA) rate for sales of ticket.

The IATA rate for ticket sales in Nigeria dropped from almost N1,800 few months ago to now N1,468 to a dollar few weeks ago and now to about N1,261 to a dollar.

The drop in the rate quickly saw the prices of tickets drop across several destinations.

However stakeholders have said that beyond IATA ticket sales rate dropping, airlines have continued to slash fares on the route in a bid to drive Air Peace away from the market and then continue to exploit Nigerians on the route.

Air Peace’s maiden flight to London which commenced on March 30, 2024 was fully booked by Nigerians who had since sought cheaper tickets to London.

The airline had pegged its economy class ticket at N1.2million, thereby slashing fares on the route.

According to the airline, a return economy class ticket goes for N1.2 million while a Return Business Class Ticket sells for N4 million naira, adding that Nigerians studying in the UK can now access their special 15 percent rebate on the already reduced economy fares.

In response, the BA quickly slashed its one way economy class ticket from Lagos to London from N3 million to N1.7million and Business Class ticket from N11million to N6.8million.

On Lufthansa, a one way economy class ticket from Lagos to London which also cost about N3 million and N9 million for Business class was slashed to N2 million for economy class and N6.5million for Business Class.

On Virgin Atlantic, the same destination which cost about N2 million for Economy, N5 million for Economy Premium and N12 million for Business Class was slashed to N1.5 million for Economy, N3 million for Premium and N6 million for Business Class.

Allen Onyema, chief executive officer of Air Peace, had announced on Arise TV that his company sold out tickets for the Lagos-London flights until September.

Since Air Peace continued to get more patronage on the route, competing carriers have continued to ‘fight back’ by slashing fares by over 70 percent on the route.

Just two months ago, average cost of economy class ticket from Lagos to London for airlines connecting flights to London was about N2.5 million.

Checks on prices by most of the flights, as of Wednesday, show that a one-way economy class ticket on Egyptair has dropped its Lagos-London economy ticket price further to N585,620. Air Peace London to Lagos now goes for N816, 130, British Airways goes for ₦981, 848, Virgin Atlantic N1.1m, and Royal Air Moroc N569,422.

Also, RwandAir has pegged airfare to N679,070, Ethiopian Air N677, 824, Turkish Airlines N807, 408, Air France London N1.1m, while KLM pegged its price to N1.1m.

While foreign airlines denied that they did not bring down fares because of Air Peace but as a result of drop in foreign exchange rate, other stakeholders argued that the slash in ticket price by Air Peace on the London route played a significant role in the slash of prices by foreign airlines.

Bankole Bernard, travel and tourism expert and chairman of Airlines and Passengers’ Joint Committee (APJC) of the International Air Transport Association (IATA) who was a guest on Channels Television’s The Morning Brief recently, said foreign airlines operating in the four major airports in Nigeria of making more than enough profit, unchallenged

The four major gateways are Lagos, Abuja, Port Harcourt, and Kano.

“How come all of a sudden airfares have gone down? What could be responsible for that? Number one: there is a new entrant to a major route (Lagos-London),” Bernard said.

“There are two major destinations that Nigerians ply. The first is Dubai and Dubai has been out of it for a while now due to visa restrictions. So, Nigerians resorted to the London route. The UK route is where a lot of foreign carriers use to earmark their airfares.

“Now that Air Peace has come into that space with a direct flight that will not cause any layover in any other country, the price has dropped. Why? What happened? Is there a magic around that? We should be able to know what made the prices drop.

“The prices will drop as long as we have another form of supply that is different from the conventional ones. The supply that we now have — that is Air Peace, which is a direct flight — will put pressure on every other route. So, all the other airlines are forced to adjust quickly or they will be out of the market in no time,” Bernard said.

The Air Peace chairman has also said that the significant reduction in international airfares by foreign airlines operating the Nigeria-UK route is an attempt to prematurely remove Air Peace from the route.

Onyema who made this revelation recently during an interview on the Channels TV pointed out that prior to his airline entering the Nigeria-UK route, foreign airlines charged exorbitant prices, with business class tickets costing as much as N17 million and economy class going to N5 million, attributing these high fares to the exchange rate.

However, just weeks after Air Peace started operating on the Lagos-London route, the same foreign airlines drastically reduced their fares in an attempt to oust Air Peace, even though there was no significant change in the exchange rate between the dollar and the Naira, Onyema claimed.

“The foreign airlines were taking between N15-N17 million for business class, N6 million for premium economy, and N5 million for economy.

“Then Air Peace came on, charging N4 million for business class, and economy class starting from N1.2 million.
“Now Air Peace did this, everybody has came crashing their prices from N18 million to N5 million.

“Dollar did not change,” Onyema said.

Onyema further elaborated that foreign airlines are conspiring to cut their fares to levels below their break-even point, aiming to push his airline out of the Nigeria-UK route. He warned that if these foreign airlines succeed, Nigerians would face considerably higher fares than the current rates.

But Kingsley Nwokoma, the president of AFARN told BusinessDay that fares reduction on the London route and other destinations is not because of competition by Air Peace but a drop in the foreign exchange rate and the repatriation of trapped funds.

“Competition is good but before Air Peace came onboard, foreign airlines have been speaking to the International Air Transport Association (IATA) and the government on releasing low inventories. This discussion has been going on for a while now.

“A substantial amount of trapped funds have been paid to foreign airlines and that was why foreign airlines released lower fares. The reason why fares went up in the first place was because low inventories were shut down.

“Now government has shown enough goodwill to make payments, so it is in the interest of airlines to also show some goodwill to Nigerians by making low inventories available. To the best of my knowledge, CBN has cleared all the backlog, the only outstanding payments are the ones with the bank,” Nwokoma said.

He stressed that it was at the same time CBN cleared the trapped funds, that naira gain strength. This, according to him, made fares drop. “Fortunately all these happened the same time Air Peace commenced its Lagos-London flight,” he added.