Airfare hike: How Nigerians are flying against all odds
International carrier
As the scarcity of foreign currency bites harder on the economy, with attendant effect on ticket fares, Nigerian international travelers are opting for longer flight hours to save half the cost. WOLE OYEBADE reports.
Adeola Makanju received the N1.2m bill in utter disbelief. “You can’t be serious. Are you sure this is for me?”
“Yes, madam. That is their price now,” replied the travel agent and quickly switched to another customer.
Makanju looked round the Murtala Muhammed International Airport (MMIA) terminal like she was seeing it for the first time.
For about two years, she had planned the holiday trip to United States (US) and just last week, all appeared set for the family of three – two adults and an infant – to fulfill their dream. She didn’t anticipate the current price regime.
July 2014 when the US trip first came to mind, an economic class ticket per head on Delta Airline cost about N300, 000. Now the price has doubled. Lufthansa version of the same ticket is pegged at N700, 000. British Airways offers N800, 000 ticket per head, economy class!
One hour later, Makanju left the airport terminal with a smile. In her hands were economic class tickets of Emirate Airline, valued at N635, 000 (for two adults and an infant). The family will fly cheaper but for longer hours (two days) on Lagos-Dubai- Washington route.
Makanju’s travel agent told The Guardian that travelers are beginning to reconsider their preferences since tickets prices went overboard; costing an arm and a leg.
“People going for leisure (like Makanju) are rooting for those Asian and African airlines, though the travels take longer hours but affordable. Even the business travelers are trying to adjust. That is the situation right now,” he said, on condition of anonymity.
Premium carriers, premium hike
There are no fewer than 35 international airlines connecting Nigeria to the rest of the world and about half of them are premium carriers.
They are premium for reasons not unconnected with regal services that they provide for the Nigerian elite class, largely made up of government officials, oil and gas magnates and other wealthy citizens in the ABC class of the society.
Nigerians indeed have high taste and these tasty mega carriers, like British Airways, Delta Air, United, Emirates, Etihad, Lufthansa, KLM and Virgin Atlantic among others, have never been short of patronage come what may.
“The airlines know that there will always be demand, so they can afford to raise the fares anyhow and still meet their targets. If they have serious competition and not dominating our market, they would not be throwing at Nigerians some of the highest prices possible on the African continent,” a keen observer said.
Currently, British Airways, which had previously charged about N350, 000 or less for an economy class, return ticket from Lagos/Abuja to London now charges about N834, 000.
Lagos-London economy class return ticket flight on Virgin Atlantic now goes for about N801, 000 as against N300, 000 some months ago.
Lagos/ Abuja to London, economy class, on Air France or Lufthansa is currently in the neighbourhood of N400, 000. A Business Class ticket now goes for as high as N3m as against the N1.5m a year ago on the Lagos-London route.
On the Lagos-Atlanta and Lagos-Houston routes, Delta Airlines and United Airlines, which used to fly Economy Class passengers for between N270, 000 and N330, 000 some 12 months ago, now render the same service at an average fare of N600, 000.
Difficult business terrain
Yet, it is not all about the ticket fares, because having the money still will not guarantee you a travel ticket.
The Guardian gathered that operators are beginning to frustrate travelers by making booking and payment platforms inaccessible to travelers paying in cash (Naira).
The alternatives that are now advised through the back door are for travelers to pay (dollars) to airline offices or buy the ticket from overseas. With this new development of paying in dollars, Nigerian travelers are paying more through the black market rates.
Through such practices, foreign operators are helping themselves to acquire scarce dollars and not further compound their woes over inability to repatriate ticket sales, currently estimated at $600m.
It would be recalled that the current administration last year unveiled a fiscal policy, through the Central Bank of Nigeria, restricting access to foreign exchange and funds transfer out of the country. It is one policy the airline operators are blaming for the fare hike and “restructuring” that further raised the odds against travelers.
Apparently unable to cope with the current tide, Spanish Airline, Iberia Plc, said it would from May 12, 2016 halt flight operations into and out of Nigeria due to low passenger traffic it has been recording in the past few months.
The airline, in a letter dated April 19, told trade partners that though the decision was hard to take, it could no longer continue on the route due to low patronage.
Although Virgin Atlantic has not stopped flights into Nigeria, it has sacked all Nigerian crew. This is the second foreign airline in about one year that will be citing difficult times as reason for either restructuring or stopping operations.
Meanwhile, stakeholders in the travel industry have faulted the astronomical cost of air tickets by the airlines, especially the foreign carriers even as they described the excuse of forex scarcity as unacceptable.
Describing the situation where taxes that go to the airlines are higher than base fares as unacceptable, the stakeholders have in fact petitioned the Federal Government, through the Ministry of Aviation, to caution the foreign airlines over the alleged sharp practices.
The Publicity Secretary of the National Association of Nigeria Travel Agencies (NANTA), Ngozi Ngoka, observed that the cumulative effect of taxes and surcharges by airlines also generated a final price to the passenger that could be as much as double the advertised airfare for a short-haul flight.
Chief Executive Officer, Gadshire Travels, Gbenga Adebayo, said that the arbitrary increment and gap between what is charged in Nigeria and other African countries on the same routes are due to the failure of regulatory authorities to perform their duties.
Flying longer for less through Africa, Asia
Chairman, Airline Operators of Nigeria (AON), Nogie Meggison, however, reckoned that the current “unhealthy development” is driven by the biting dollar shortage and elevated black market rates, leaving foreign airlines facing losses on their routes and struggling to acquire foreign exchange for routine and scheduled maintenance.
Meggison said: “Passengers who often will not book Arik or Medview to travel outside the country, may be faced with no option but to travel using these airlines, since the local airlines still collect naira,” he said.
Indeed, Nigerians are beginning to tilt in the direction of African and Asian carriers, except for those with indelible taste for luxury and still able to have their ways around the forex barriers.
Ticket fares of Nigerian flag carriers like Arik and Medview, and those of Etihad, Quatar, Emirates among others have remain stable and it is no surprise that they had higher patronage in March.
A performance index of international airlines for the month of March, released by the Nigerian Civil Aviation Authority (NCAA), shows that Arik Air, with 234 number of flights, has a total number of 16,285 inbound and 17,009 outbound passengers.
Emirates, with 101 flights operated, had 18,365 inbound passengers and 22,069 out bound passengers. Etihad, even at 20 flights operated, had 13,956 and 14,867 inbound and outbound passengers in that order.
British Air in March operated 66 flights, carrying 11,643 inbound and 11,318 outbound passengers. Delta Air operated 30 flights, conveying 4,817 and 4,293 inbound and out bound passengers respectively.
United Air, at 26 flights, carried 4,480 inbound and 4,802 outbound passengers. Virgin Atlantic, 35 flights, 7,918 inbound and 6,007 outbound passengers. Iberia, 20 flights, 1,328 inbound and 1,714 outbound passengers for the month of March.
Besides the wider frequencies of the likes of Emirate and Etihad, the free transit visa and hospitality the operators are offering in Dubai are proving to be good compensation for the hours spent waiting for the connecting flight.
A travel agent said: “Our customers would usually want direct flights to Europe and America but now very expensive. They would welcome a cheaper alternative reluctantly due to several hours of waiting in transit.
“But they are usually happy to hear that free hotel stay and food will be provided. It is even an opportunity to visit Dubai for free, for those that have not been there and enjoy some tourism without paying extra,” he said.
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2 Comments
This is crazy oh . Highly crazy
A while ago, Mr. Chris Ndulue, the manger of Arik Air, explained why the airline dropped out of the Lagos – Dubai route. He said Emirates airline serve both as the civil aviation authority, the sole catering service provider for all airlines, the sole hospitality service provider (e.g., hotel accommodation which they also own), aviation fuel, and the sole ground services provider for all airlines flying into Dubai airports. In essence, the different services cross subsidize each other. Which means Emirates and Ethihad airlines could undercut other airlines in plane tickets prices and compensate with higher prices in the monopolistic services. He also explained that the charges for these services were usually much higher than the market rates.
So, not only are the Emirates and Ethihad airlines effective monopolies, they are also an essential aspect of the UAE government strategies for economic diversification from oil which started over the last decade. These airlines’ operations tie into the main economic vision of developing a competitive trade and hospitality hob serving the wealthy Middle East and the less economically buoyant Africa and South Asia markets and they have virtually succeeded already. Nonetheless, Mr Ndulue tactically avoided mentioning the main factor: Nigerian peoples’ crass consumer behavior that favors anything foreign, no matter what.
Here in the U.S., the major local carriers are charging the UAE airlines for monopoly on the U.S. – Dubai route for the same reason Arik Air disclosed. Recently, Medview and AirPeace airlines announced they would start Lagos – Dubai route in the near future. However, I doubt the economic viability of the route for the same reasons cited above. The Nigerian government and Nigerian consumers continue to confound classical economic and consumer behavior theories. Which other Nation with significant airline travel market does foreign airlines dominate? Certainly, not Ethiopia, Kenya, South Africa, Morocco, and Egypt.
Furthermore, based on anecdotal evidence over the past several years, I can put forward the hypothesis that the Nigerian consumer defies another classical economic theory of price elasticity: The Nigerian upper middle and upper class consumers do not typically respond to higher prices by switching to lower cost alternatives as expected. This is mainly because the egotistical need to separate themselves from the lower middle and lower class consumers far outweigh sound economic reason.
Further, this same consumer behavior could be found in many other industries: Whisky/Wine, Executive jets, including the Presidential aircraft fleet, Polished rice, cars, lace, etc. The Nigerian population epitomizes this well known economic malady of excessive preference of foreign-made goods to local ones. While other nationalities worldwide have recognized this Nigerian malady as part of the great corruption disease in the land, others have used more subtle descriptive terms such as: ‘aspirational consumption.’ Regardless of the terms used, it is unequivocal that the excessive consumption of foreign-made goods is virtually responsible for the inherently unstable Nigerian economy that it unable to withstand external shocks like the recent crash of the oil price. To illustrate one aspect of this phenomenon: Over the past decade, Nigeria earned far more dollar revenue from oil/gas exports but Algeria’s external reserves now stand at over 150 billion USD while Nigeria’s reserves is about 27 billion USD. (CIA world fact book: 2013, 2014, and 2015).
And for the records, I will postulate here that the solution to the current foreign exchange crisis in Nigeria does not lie in Naira devaluation which would only increase mass poverty and a possible terms of trade crisis, defaults in foreign financial obligations or IMF loans with stifling macroeconomic conditionalities, ALA 1980s and 1990s situation all over again. The solution is real economic diversification and improvement in terms of trade (i.e., exports of more variety and quantity of goods to more varied markets). The sectors that would have immediate and medium term impact are the Agric., petrochemicals, manufactured goods, and solid minerals. This is not uncommon knowledge however that the main issue is extensive lack of capacity to think through and to execute plans, a major blight in Nigeria’s quest for development. Slogans, mere platitudes, and media campaigns won’t do it. What is required is skilled mangers, institutional capacity enhancements, applying required resources, both financial and otherwise, setting clear targets, timelines, timely reviews and audits, and people must be assigned clear responsibilities and held accountable for success or failure. Ironically, while these principles have largely been taken for granted in organized countries including here in the U.S., the Nigerian officials continue to talk about lofty objectives with vague execution plans and that is why most projects fail. And unsurprisingly, It looks like the new regime in power in Nigeria will continue the same pertain.
This is opposite of what you would typically expect from most countries. Two examples will suffice here: In the late 1990s I was working for Gauteng provincial government that administers the cities of Johannesburg, Midrand, and other major hobs in South Africa. I used to have regular contact with top ANC party stalwarts and party strategists usually at the residence of the then Nigeria consular general’s home (Mr. Charles Onwuabu, the late cousin of Chief Chuba Okadigbo, both of blessed memory). They laid out a strategy to make SA a major global auto maker in 15-20 years which included 70-100% tariff on imported vehicles, total ban on importation of used cars, and well developed consumer finance ( and of course the SA government does not provide car to any government official. Everybody buys their own car from the market under similar terms).
Today, SA is one of the top ten global auto manufacturers. In fact, Mecedez Benz C class are all made for the global market at the company’s East London Plant. The ANC official also laid down a plan to dominate African market, including the Nigerian market, with SA companies, products, and services in 20-30 years. And looking at todays trends, one would argue that they are almost half way towards accomplishing the later goal as well.
Other examples of clear visions and effective executions and results are the UAE economic diversification plan I discussed above and Algeria’s success with local content, backward integration, and blocking of leakages for capital flight (money laundering, over-invoicing, currency trading and speculation, and no official funding of black market foreign exchange trading).
In conclusion, I would postulate that there is no short term solution to the present economic crisis in Nigeria. However, economic diversification promises clear medium and long term benefits, including prospects for more stable local economy able to withstand external shocks. The last time I checked, Malaysia earned more forex from oil palm and derivatives than Nigeria earned from oil and gas combined in 2015. Also rubber and derivative products were the few commodities that have maintained stable prices over the past two years and there is no glut anywhere. The same goes for industrial starch, Cocoa, Peanuts, Tea, cut flowers, and cotton.
The EU are now even asking Nigeria to bring any amount of these items to EU markets, something quite unusual in global trade politics. So, the onus is on Nigerian people and their leaders to make a clear choice for themselves. There is important for Nigeria officials and Analysts to understand that the World Bank and IMF does not have the solution. They are mostly experts in the workings of developed economies and their records for developing economies is very abysmal, to put rather mildly.
We will review and take appropriate action.