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Row over price-fixing as FCCPC moves to sanction airlines

By Wole Oyebade
04 March 2022   |   2:25 am
The Federal Competition and Consumer Protection Commission’s (FCCPC) move to sanction airline operators for alleged price-fixing has elicited row in the sector, with stakeholders demanding statutory ..

Federal Competition and Consumer Protection Commission, Chief Executive Officer Babatunde Irukera

•‘How airlines collude to raise airfares’

The Federal Competition and Consumer Protection Commission’s (FCCPC) move to sanction airline operators for alleged price-fixing has elicited row in the sector, with stakeholders demanding statutory rights of the body to legislate on core aviation affairs.

Members of the aviation community said the FCCPC’s intervention amounts to interference in the regulatory functions of the Nigerian Civil Aviation Authority (NCAA), which understands the prevailing circumstance and is in the best position to call operators to order where necessary.

Airline operators have lately come under criticism for a spike in airfares, though the Airline Operators of Nigeria (AON) denied conspiracy of price-fixing. The carriers had recently pushed minimum airfares up by at least 66 per cent in response to the spike in prices of aviation fuel and cost of operation.

The upward adjustment across the carriers fortnight ago, has since pegged the minimum Economy Class tickets at around N50, 000 for future flights, with ‘today’s flight’ travellers buying the same one-hour one-way economy tickets at an average of N80, 000 each – a sheer rip-off from the consumers’ perspective.

Apparently waking up late to its responsibilities, the FCCPC accused the operators of price-fixing, saying its investigations showed the airlines colluded to increase airfares against Section 107 (1)(a) and Section 108 of the Federal Competition and Consumer Protection Act, 2018 (FCCPA).

Chief Executive Officer of the commission, Babatunde Irukera, said the airlines were culpable of forming a “cartel” to jack up airfares in a coordinated manner and in breach of extant trade rules.

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.

Similarly, the 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.

He said: “The FCCPA, Civil Aviation Act and implementing regulations of both legislations respect the right and prerogative of airlines (as other businesses) to set their fares independently subject to, and in accordance with prevailing law and applicable processes. However, prevailing law expressly prohibits coordination, agreement or cooperation between competitors in setting fares.”

He noted that the Commission, in collaboration with the Nigerian Civil Aviation Authority (NCAA), has commenced an investigation with respect to this subject. “Though the investigation is at early stages, there is sufficient probable cause to proceed and also provide interim measures to restore a free and undistorted domestic aviation market.”

In that circumstances, the Commission, therefore, directed in accordance to Sections 17(a),(e),(l),(s),18(3)(a), 157 and 158 of the FCCPA, the discontinuation of any agreement or arrangement on the price-fixing, pending further directives on the subject matter.

In reaction to the FCCPC’s order, a top official of one of the airlines said they (operators) might have erred in relaying the exigent hike in airfares to NCAA as and when due.

“But I strongly doubt that the reverse order is the remit of the FCCPC. The development is a matter of life and death for operators and the NCAA understands our plight and regulates our affairs accordingly.

“No airline has raised its baseline in the last three years, yet the naira has been devalued at least three times. Aviation fuel is over 100 per cent to what it was a year ago. And you think we should keep selling airfares at the same price, yet think we will survive? No! We are not unmindful of our customers, which is why we keep urging them to buy tickets early enough at reduced rates. The NCAA understands these issues and FCCPC should leave them alone to do their job,” he said.

Apparently in agreement with the operator, Secretary General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), said the FCCPC’s in-road into aviation commercial affairs would only create fresh chaos.

Ojikutu queried: “Who is in charge to enforce regulations and sanction, NCAA or FCCPC? The truth is that another problem may be brewing. We have received a lot of interventions on enforcement of commercial regulations from outside influences this year; aside from the regular ones from the ministry, there have been a couple from the National Assembly and now from the FCCPC. Where is the autonomous designated responsible authority, the NCAA, in all these?”

Preliminary investigations by the FCCPC showed that the AON has been having a series of meetings over the period of three weeks to deliberate on multiple industry-wide issues that affect its members.

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.

FCCPC stated that the Commission also had credible information that while attendees at the meeting may not have arrived at a consensus, the meeting ended in a resolution that encouraged, permitted or consented to the coordinated conduct.

“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.

“However, on Friday, February 18, 2022, at 6:31 p.m. Aero Contractors informed its trade partners (travel agents) and its commercial executive team by email that ticket fares were reviewed effective February 18, 2022, with the least fare being N50,000 across all routes. Aero Contractors noted in this communication that all other airlines have effected the same increase.

“Within days, Max Air also increased fares to the same minimum N50,000. Ibom Air and Dana approximately 48 hours after what appears to be the initially coordinated conduct, also increased fares although not to the purported N50,000 minimum.

“Green Africa Airlines maintained its existing fares between N33,000 and N38,650 but has progressively increased its fares rising to approximately N47,000 on its Lagos-Abuja route on Wednesday, February 23, 2022.”

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