BY PAUL ONORIODE EMERHANA
Before now, international travels from Nigeria to any part of the world were more expensive than flying from countries in Africa with even longer flying time. According to Business Day of July 19, 2023, a recent check on ticket price showed that a one-way economy class ticket from Lagos to London on Turkish Airlines cost $1,636 (N1,313,708, using the rate of N803/$ on the I&E window). But a one-way ticket from Cotonou to London on Turkish Airlines cost $469 (N376,607) for the same date. A flight from South Africa to London or Istanbul, despite the long distance, has always been cheaper than flights from Lagos to London or Istanbul, on the same airline and same date. Two reasons were advanced as the reason for the disparity in air tickets. The exchange rate crisis and airlines trapped funds. Recently, the International Air Transport Association (IATA) disclosed that Nigeria owed $812.2 million out of $2.27 billion trapped funds, making it the country with the highest trapped funds globally.
On March 30, 2024, the Nigerian flag career Air Peace flew from Lagos to Gatwick Airport, London, in what could best be described as a triumphant entry into the international aviation space after the defunct Nigerian Airway left the international air corridors many years ago. The Chief Executive Officer (CEO) of Air Peace Airlines, Allen Onyema said the airline is ready to take Abuja-London flight and is planning to begin flights to New York and Houston by the end of 2024. Suddenly, airlines flying from Nigeria to London are now underpricing their ticket – the plan is to take Air Peace out, according to Mr. Allen Onyema; if they succeed, Nigerians will pay 20 times over. It is therefore pellucid that the reason for the high-ticket price is not linked to trapped funds or exchange rate challenges as claimed by the airlines but purely to exploit Nigeria.
This was the same situation in 2019 when Air Peace commenced flights from Lagos to the United Arab Emirates, base fares immediately dropped on the route from N400,000 on Emirates and Qatar to about N250,000.
According to the Sixth Meeting of ICAO held at Montreal in 2013, international air transport competes as a service industry in an increasingly open global market, so sustainable competitiveness depends upon open and fair conditions of competition. Indeed, open and fair competition provides choice and value for money for consumers, supports quality, productivity, efficiency and innovation in the air transport sector. As the global air transport market is becoming more and more open and competitive, it is more important to ensure that competition is not distorted by unfair practices. And where fair competition conditions exist, it is best to repeal or reduce market access restrictions e.g. in bilateral air service agreements, so that airlines can compete freely. Indeed, fair competition is an important principle to achieve the objective of full liberalization of market access and to reap its benefits.
Furthermore, the existence of fair competition is also likely to encourage States to make further progress on liberalizing airline ownership and control.
The Preamble of the Convention on International Civil Aviation (Chicago Convention) includes “equality of opportunity” as one of the principles for the development of international air transport. Article 44 on the objectives of ICAO refers to the right of each ICAO Member State to have ”a fair opportunity to operate international airlines” and to non-discrimination between Member States.
As of the signing of the Chicago Convention, these concepts have served as important guiding principles in the economic development of international air transport and have been interpreted and elaborated through bilateral air service agreements (ASAs) between Member States.
The reduction by States, of control within the air transport industry, known as “liberalization” or “deregulation”, has fostered competition between air carriers. Enhanced competition, in turn, has led many carriers to consider consolidation as a means by which to achieve economies of scale and scope and to respond to consumer demands for global networks. With heightened competition and consolidation, has come a heightened risk of anti-competitive behavior, including abuse of a dominant position and oligopolic practices. In addition, in order to keep their national airlines competitive in a liberalized market, some governments may be tempted to lend support to their airlines through means that could deny airlines of other States a fair and equal opportunity to compete.
The Competition framework in the aviation sector is one that is clear and unequivocal. Some of the competition policies and principles in the aviation industry though not officially recognized includes charges insufficient to cover costs, excessive capacity/frequency, joint boycott of transactions, negative economic effect, Intent/effect of damaging airline, abuse of dominant position, discriminatory pricing, Others are the ability to manipulate prices or to force entering into agreements, unfair price/trading conditions, purchase/selling prices insufficient to cover direct operating costs of services, charging prices below short-run marginal cost w/ expectation of eliminating competitor, unfairly low purchase pricing, unjustifiable difference in pricing etc.
Undercutting prices is an unfair practice and anti-competition, especially when it is targeted at preventing new entrants into the market or making it difficult or impossible for them to thrive. Ethiopian Airlines for example, dropped her ticket price for Lagos to London from N1,900,000.00 (One Million, Nine Hundred Thousand Naira) only, to N680,000.00 (Six Hundred and Eighty Thousand Naira) only – N400,000:00 (Four Hundred Thousand Naira) only below Air Peace.
The strategy of these airlines is nothing short of an anti-competitive behavior as they have clearly abused their dominant position, released discriminatory pricing to create unfair pricing to Air Peace who is a new comer. With price cutting like this, Air Peace will not remain in business because attempting to sell at the new price will mean generating revenue insufficient to cover direct operating costs of services.
The plan is to kneel on the neck of Air Peace and suffocate Nigerians in the long and short run.
The Nigerian aviation industry has experienced a new thrust and propulsion with the emergence of Festus Keyamo, SAN as Minister of Aviation and Aerospace. Nigerians have seen, through his robust understanding of the international legal regime, how the Nigerian aviation actors have fared poorly years before now, viz a viz the Cape Town Convention and Protocols. One of the major achievements or outcomes of the engagements of the Minister of Aviation is the effort of the Aviation Ministry to strengthen the legal and institutional framework to support the growth of the airlines. The reality is that the sudden crash in air ticket fares or if you like joint boycott by some airlines, is aimed at creating an artificial turbulence in the sky for Air Peace and the gains recorded by the Keyamo effect.
The Federal Government, through the Ministry of Aviation, must as a matter of national policy defend Air Peace and keep her in the sky under what is known as State aid rules. No man can engage in a boxing bout with Anthony Joshua with one of his hand tied behind. Reasons why the Federal Government must protect and keep Air Peace in business cannot be overstressed. First, it represents our national pride; the Government must give it the requisite support to enable her compete through State aid. If for nothing, Air Peace has stood in the gap for Nigeria and Nigerians stranded abroad on several occasions. Secondly, if Air Peace is pushed out of the international corridors by other Air Lines with their price crash strategy, it will fail to meet its lease rentals. This will further dent Nigeria’s airline credit ratings, and ultimately affect the credit worthiness outlook of Nigerian airlines.
Thirdly, many jobs will be lost and the poverty and misery index of Nigeria will increase. The plan is simple: force Air Peace out of the sky with low fare and return to high fares immediately after.
To push back this “corporate terrorist attack” on Air Peace and by extension Nigeria, it is recommended that the Federal Government should effective immediately, develop competition laws and policies that apply to air transport, taking into account national sovereignty and consider the ICAO guidance on competition.
Secondly, Air Peace should join any of the airline alliance group. The three major airline alliances, Star Alliance, SkyTeam and Oneworld, now represent more than 60 per cent of the global market share, measured in available seat-kilometers for total scheduled passengers. Competition today is not just between individual airlines but increasingly between these alliances. Becoming a member of any of the alliance will protect Air Peace from these price-cut attacks and will also guarantee her global reach.
State Aid is recognized under the ICAO rules of competition. One of such State aid is the use of an Executive Order to direct all Federal and State Government employees to fly Air Peace for any official and private engagement outside Nigeria. In other words, Air Peace should be the official air career of the Government of Nigeria. Also, the Central Bank of Nigeria should release a circular directing all commercial banks to sell PTA to only customers with confirmed Air Peace flight tickets out of the country. Any customer flying another airline should be made to pay extra charges equaling the opportunity cost of not flying Air Peace and the charges so collected be remitted to Air Peace. This is the meaning of affirmative action.
The Federal Government should not make provision for any form of subsidy for Air Peace. The subsidy should be borne by anyone flying out without using the Air Peace. Lastly, The Ministry of Aviation should partner with the NTA, Channels TV, Arise TV, AIT etc., to advertise Air Peace on every of their prime-time show. “Fly Naija! Fly Air Peace!” Should be a matter of national patriotism.
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Paul Onoriode Emerhana, LL.M is a member of ISTAT and a PhD student majoring in Aircraft Finance and Security Interest at the Rivers State University, Port Harcourt.
