Address airfare crisis to save travel economy
For a fact, the foreign airlines’ stuck fund crisis, worsened by the naira-to-dollar free-fall, has made overseas trips a luxury too expensive for average Nigerians. Yet, to have ignored the problem for this long is killing not only the travelling public, but also the air travel agencies and the travel economy at large. The threats that traditionally hobble the air transport businesses are usually external.
But the paroxysm convulsing the sector in Nigeria is wholly internal and smirks of the mismanagement of both its potential and opportunities. To turn the corner, the current administration must rally the sector to get its acts together and conduct the aviation business in national interest.
It is no longer news that Nigeria, after Venezuela, tops the list of countries indebted to foreign airlines and sitting on funds from sales of air tickets in local currency. In the oddly familiar narrative, Nigeria sticks out like a sore thumb with a debt of $800 million out of about $2 billion cumulative funds of foreign airlines stranded globally in the last two years. Understandably, the Nigerian foreign exchange market has been a basket case in the later stages of the President Muhammadu Buhari-led administration. Bogged by decline in foreign exchange earnings, FX liquidity crisis and steady depreciation of naira value, the Central Bank of Nigeria (CBN) also failed to meet its obligations to all critical sectors of the economy, not just aviation.
Irrespective of local challenges, keeping foreign airlines’ funds in an unstable economy and defaulting in keeping remittance promises will attract dire penalties. An airline like Emirates left. Others that could not let go of the ‘bad market’ simply blocked lower inventories and started selling at premium. More daring European and American carriers started selling to dollar customers only. Put together, it means that economy airfares that were erstwhile sold in Nigeria and still the same in other less toxic markets for an average of $1000 are now sold in Nigeria at between $3000 to $4000 per seat. Coupled with the recent harmonisation of rates, prices of airfares have further increased.
A six-hour Lagos-London Economy class ticket now ranges between N1.1 million to N4.2 million – subject to airline of choice, place, and time of booking. Its Business class variant sells for between N4 million to N10 million. Interestingly, the aircraft cabins in Lagos and Abuja airports are still full!
Tellingly, most Nigerians are of the happy-go-lucky stock. And come what may, they are perpetually on the move, which has earned the air transport sector its significance among the comity of nations. The middle-class Nigerians regale overseas trips and average Nigerians freely crisscross the globe for all manner of reasons, including the most ludicrous. To feed our hubris, many air travellers now by-pass the prevailing realities at home by patronising neighbouring countries for Nigerian outbound flights. According to the National Association of Nigerian Travel Agencies (NANTA), about 40 per cent of travellers departing Lagos and Abuja airports bought their tickets from Benin Republic, Ghana, Europe or America. Another half of them simply fly to Cotonou or Accra for affordable airfares overseas.
Clearly, Nigeria’s loss is her neighbours’ gains. Besides more than half of travel agencies and businesses that have closed shop since the pandemic period till date, the steady loss in local patronage is a dip in potential earnings in revenue and charges per Nigerian ticket bought abroad. And that is a reason the Civil Aviation Authority, aviation service providers and the government should be worried.
The industry in quandary notwithstanding, there is no undermining the viability of the Nigerian market that both the international air transport and major airlines dare not joke with. A bubbling country of over 200 million people with an aviation industry that can pull $1.8 billion in revenue yearly and allows multiple frequencies to foreign carriers is rare in the world. All the legacy carriers understand the significance of the Nigerian market, except Nigerian regulators and operators alike that are often laid back or often adept in wrongheaded directions like Hadi Sirika’s Nigeria Air venture.
While the Federal Government and the CBN have a duty to its foreign business partners to clear the backlog of stuck funds, the crisis is such that cannot be wished away so soon, given that it is a larger problem of the economy. The immediate alternative, and towards a sustainable solution to the problem, is to activate the competitive edge for fair pricing in the international segment. Nigeria needs to compete and throw more capacities into the international segment. It is imperative to encourage Nigerian airlines to participate on those foreign routes and match up frequencies with foreign airlines. There is a continuing increase in airfares because of heavy demand pull on those routes that is not being matched with capacity.
The biggest beneficiaries of our lack of capacity are the likes of RwandAir, Royal Air Maroc, Turkish Airlines, Ethiopia Airlines and others that are making a clean sweep of the market. It is sad that a popular route like Lagos-London, with 21 frequencies already used to the maximum by two British carriers, still has nothing from the Nigerian operators in eight years! That is a shame and a bigger blemish on all the aviation ministers Nigeria has had in the past. Local airlines like Air Peace struggling to venture into India and Israel, should be more feasible in core routes like London, Ireland and the U.S. Having local airlines throw in the capacity will bring down prices on those routes.
It is imperative to add that the Federal Government must throw its weight behind these flag carriers (local airlines) against the feisty aeropolitics in global aviation. First, the airlines should cooperate among themselves to get stronger and as well form alliances with international airlines, then curry government’s backing. An airline must not be government-owned or a phantom ‘Nigeria Air’ before it gets government protection. Virgin Atlantic, a private airline, is globally protected by the British government on issues that have to do with international trade. You dare not touch U.S. airlines anywhere.
The government is right behind them and ready to retaliate immediately. That is how it is done in international aviation and Nigeria should not be an exception in this game.
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