The debate on the appropriate pricing for air flight within Nigeria has again generated concern following the recent hike in fares by indigenous airlines.
From between N23,300 and N48,000, many domestic airlines raise their fare to N50,000, arguing that a price below $100 (about N50,000) for one-way trip within the country is a loss for the carriers.
Officially, the US dollar traded at N415.77 as at Friday, but N571 in the parallel market.
In addition, passengers can no longer buy at discounted rates even if they book weeks ahead as it used to happen.
Not a few industry stakeholders have supported the price hike. Group Captain John Ojikutu (rtd), who has over the years declared that Nigerian airlines may run out of business due to inappropriate charges, argued that an equivalent of $100 for an hour flight in Nigeria was the right pricing.
Many other analysts say the price change was justified in the face of continuous skyrocketing of Jet A1 price, which is about N440 per litre as at last Thursday, consistent fall in the value of the Naira against major currencies at the foreign exchange market, recent hike in ground handling charges, high levies and charges by both private and public organisations, among other challenges.
The Airline Operators of Nigeria (AON), the umbrella body of indigenous airlines in the country, however refuted the price fixing regime, a situation that has been challenged by the Federal Competition and Consumer Protection Commission (FCCPC).
In its report on Wednesday, FCCPC accused AON of encouraging and ensuring price-fixing, saying the airlines colluded to increase airfares against Section 107 (1)(a) and Section 108 of the Federal Competition and Consumer Protection Act, 2018 (FCCPA).
In a statement by its Executive Vice Chairman, Mr Babatunde Irukera, FCCPC insisted that the airlines were culpable as they jacked up their prices in a coordinated manner, stressing that the FCCPA prohibits conduct or any coordination between competitors, including on the platform of trade associations.
Irukera said: ‘Specifically, Section 107 (1)(a) forbids competitors from fixing prices, and Section 108 prohibits any conspiracy, combination, agreement or arrangement between competitors in any manner that unduly restrains or injures competition’.
He further stated that coordination in increasing prices (otherwise known as a cartel) is an unambiguous infringement of the FCCPA, stressing that the current and prevailing Nigerian Civil Aviation Regulations (Air Transport Economic Regulations) in regulation 18.15.2 (i) and (iii) expressly prohibits airlines from engaging in any contract, arrangement, understanding, conspiracy or combination in restraint of competition which includes directly or indirectly fixing a charge, fee, rate, fare or tariff and any collusive action.
According to Irukera, investigation by FCCPC indicated that after a series of meetings over a period of three weeks including on Thursday, 17th February 2022, and Saturday, 19th February 2022, the association discussed multiple industry-wide issues; particularly challenges experienced by AON members.
He said the investigation also confirmed that one of the items of discussion during at least one of the meetings where AON listed no fewer than 16 items militating against their operations was to set base or minimum airfares, hinting that the commission’s understanding from intelligence so far gathered was that there was significant controversy and or an initial lack of consensus with respect to coordinated conduct resulting in setting airfares.
He said: ‘The commission’s understanding from the deliberations at the meeting is that the attendees engaged in mutual discussions and exchange of their respective revenue management models or other commercially sensitive information.
‘In furtherance of the discussions and or resolution at the meeting, certain champions of the coordinated conduct of imposing a base fare or a Minimum Re-Sale Price (MRSP) for their services in a coordinated and contemporaneous manner proceeded to increase their fares to a minimum of N50,000 across all sectors. Specifically, Air Peace, Azman Air and United Nigeria Airlines immediately proceeded with the increase. Arik followed’.
The Commission added that on Friday, 18th February 2022, at 6:31 pm, Aero Contractors informed its trade partners (travel agents) and its commercial executive team by email that ticket fares were reviewed effective 18th February 2022, with the least being N50,000 across all routes.
It said Aero Contractors noted in this communication that all other airlines have effected same increase.
The report emphasised further that within days, Max Air also increased fares to the same minimum N50,000, while Ibom Air and Dana, approximately 48 hours after, also increased fares although not to the purported N50,000 minimum.
It further said that Green Africa Airlines maintained its existing fares between N33,000 and N38,650, but progressively increased its fares rising to approximately N47,000 on its Lagos-Abuja route on Wednesday, 23rd February 2022.
Irukera noted that as such, the commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation with respect to this subject, but noted that investigation was still at early stages.
Reacting, the Chief Executive Officer of West Link Airlines, Captain Ibrahim Mshelia (rtd) defended the price raise describing it as long overdue.
Some of the service providers had increased their rates in recent times, he said, while airfares remained almost stagnant within the same period.
For instance, Mshelia said that the ground handling companies had increased handling services from about N20,000 to N70,000, customs duties were still being collected for spare parts and importation of aircraft despite the waiver regime announced by the government, while access to foreign exchange had been impossible for the operators.
He also explained that the price of Jet A1 has skyrocketed to over N400 per litre in the local market, stressing that virtually all the components of aviation are US dollar denominated.