Emerging opportunities for local carriers as foreign airlines ‘hike’ fares yet again

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Medview Airline

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Emirate

The astronomical rise in the cost of air tickets currently offered by foreign airlines is creating unsolicited demand for their local counterparts exploring the international routes. But are they ready for the challenge? WOLE OYEBADE writes.

About three weeks ago when the Central Bank introduced the new flexible foreign exchange policy, a new wave of optimism let loose among foreign airlines operating in the country.

Besides cushioning the free fall of Naira against the dollar, the operators anticipated that the flexible regime would enable operators to repatriate stuck funds and in no time bring down the cost of fares once again. The argument though logical, has proven to be incorrect.

While the Naira has declined since the policy was introduced and funds repatriated, the price of ticket fares has further increased, and out of reach of customers.

Precisely, prices of air tickets for international trips have gone up by no fewer than 20 per cent in the last few days, with economy class tickets now ranging from N700, 000 to N1 million on some popular airlines.

For instance, a Lagos-New York return ticket goes between N600, 000 and N700, 000 on economy class compared to about N300, 000 charged a year ago. A business class ticket for same route now goes for about N1.8 million to N2 million.

Findings show that the average return ticket on economy class for Lagos-London route has risen to between N553, 200 and N600, 000 as against the initial N280, 000 and N355, 000. Business class tickets on carriers like British Airways, Lufthansa, Air France-KLM, are in the neighbourhood of N2.5 million compared to about N1.2 million it was offered some 12 months back. A first class ticket on the average, costs between N3.2 million to N3.8 million per passenger.

For a return flight from Lagos to Amsterdam and Lagos to Paris, fares go for N400, 000 and above on economy class seats, from the initial N260, 000, while the business class tickets go for N2.1 million.

A passenger, who identified self as Enitan, said it was regrettable that the fares have continue to reach the rooftop without any effort to check the foreign airlines.

Enitan said while many Nigerians traveling on holiday could afford to cancel the trip or go for alternatives, “there are some of us traveling for business reasons that cannot just help the situation.”

A family of three actually canceled their summer trip, upon receiving the bill of N2.3m, which is almost an 100 per cent increase from the estimate bargained a month ago.

A United States bound passenger, Emeka Abah, told The Guardian that an advice of traveling from Kotoko in Accra, Ghana was becoming appealing, considering the comparatively cheaper fares in Ghana as against what is obtainable in Nigeria.

Prior to the flexible foreign exchange policy regime, fares on offer in Ghana and other West African countries were actually cheaper. It is, however, not clear if the comparative differences still exist in the current exchange realities.

Travel agents lamented that some of their clients going for summer vacation have cancelled their bookings due to the high cost of airfares.

But in fairness to the foreign airlines operating in Nigerian airspace, the current exchange rates could be blamed for the ‘hiked’ fares.

Repatriating fund at the current market rate of about N285 per dollar, as against N199 former official rate, amounts to about 40 per cent loss of value.

At least two foreign airlines that have now withdrawn their funds on Tuesday confirmed the 40 per cent loss.

It would be recalled that the airlines have waited for 12 months to repatriate about $600 million stuck in the Nigerian economy with several threats to quit flying Nigerian route. The operators were, however, excited with the new flexible forex regime announced by CBN, without foreseeing the huge loss that would come with it.

An official of one of the airlines that has repatriated over $5 million till date said that their worst fear was outright devaluation of the naira but the flexible policy doused their tension.

The official, who spoke on condition of anonymity, said it was expected that the exchange rate would be “slightly” on the high side to start with, but the current rate was beyond them.

He said: “We (foreign airlines) are losing money and it doesn’t make anyone happy. The money is long overdue to return to United Kingdom (UK) but the exchange rate is crazy. That is why the fares appears increasing; not that we hiked fares,” he said.

But as the cliché often run, one man’s meat is another man’s poison. The current development appears to be beneficial to local airlines that are trying to flex some muscles on the international front.

Besides the gulf carriers like Emirate, the likes of Arik Air and Medview – the two national flag carriers – have in fact seen rise in demand given their patronising fares.

A Lagos-London return ticket on Arik Air ranges between N350, 000 and N400, 000. It’s counterpart, Medview, also to same destination, costs about N398, 672. Emirates and Ethiopian Airways still provide ‘cheaper fares’, compared to other airlines.

A keen observer of the aviation sector, Emmanuel Adebajo, said that the situation had a lots of positives for the country’s carriers, if only they would maximise the opportunities.

“Patronage has swollen in the last couple of weeks. It is an avenue for us to support our own and help them succeed. After all, it is cheaper to fly Arik or Med-view. The problem is just that a lot of us (Nigerians) have already cultivated a taste bud for everything foreign. It is time we tell ourselves the home truth that those over-priced services on foreign planes are also possible on our own carriers and at a price that will not tear your pocket,” Adebajo said.

Managing Director of Omni-Blu Aviation Services, Akin Olateru, said it was high time the Federal Government had exercised political will to support the local airlines to ensure that they flourish.

Specifically, Olateru said government needed to exempt airlines from Value Added Tax (VAT), adding that it is only in Nigeria’s aviation industry that such negative taxes are introduced as if the authorities are out to killing the carriers.

He said: “Government should provide easy access of foreign exchange to our local airlines. They must devise ways to help. We are the only country that still charges VAT on leisure travel, which makes airfares to be expensive.”

He pleaded that government should give the airlines tax holiday, stressing that the $50 international travellers from Nigeria pay that goes to the Federal Airports Authority of Nigeria (FAAN) should be done in Naira at an agreed rate.