Federal Competition and Consumer Protection Commission has accused Nigeria airline operators of acting like a cartel to fixing air fare. This it said is illegal and urge operators to revert to old fares. But some Domestic Airlines Executive Officers have said that airfares hike is long overdue in Nigeria. The officers made the assertion during separate interviews in Abuja. According to them, some charges to be paid by the airlines have been skyrocketed while most maintenance services are done through foreign exchange. Managing Director of Aero Contractors, Capt. Mahmoud Abdullahi, who said that airfare hike was overdue, maintained that the fuel price kept increasing while some service providers had increased their tariff by more than 250 per cent. “The airline fare hike is long overdue, as you are aware of the increase in the fuel price and forex
“Additionally, of recent, the service providers (Sahcol and Nahco) increased their tariff by 250 to 300 per cent; at the international airport, it is even 500 per cent increase. Fares that you see now have always been in the airlines inventory. What airlines do is to close lower bucket fare and open next fare bucket, but those lower fares are still in airlines inventory, “ he said. According to Abdullahi, though airlines may experience low patronage, they have to survive. The managing director said that every move by the airline was in the interest of safety. He pointed out that airline income was in naira while most of their expenditure was in forex. Regulators play a very good role in pricing. If an airline prices its ticket so low, regulators have to investigate to find out how this airline can meet its obligations with the price that it is charging. They have to make sure the airline does not cut corners on maintenance,“ he said. Abdullahi said that no airline would intentionally delay or cancel flights, but due to variables including; weather, technical, airport facilities, sunset airport among others. The Azman General Manager, Mr Suleiman Lawan, who also spoke with NAN, said that it had reached a time when the airfares could no longer remain the same as they used to be. According to him, aircraft handling is different from other transportation systems.
But a statement issued by Babatunde Irukera, Executive Vice Chairman/Chief Executive FCCPC said “The Commission’s preliminary investigation discloses the meeting dates of Airline Operators of Nigeria, AON to have been on or about February 8, February 17 and February 23, 2022. The investigation also confirms that one of the items of discussion during at least one of those meetings was to set base or minimum air fares. The Commission’s understanding from intelligence so far gathered is that there was significant controversy and or an initial lack of consensus with respect to coordinated conduct resulting in setting air fares. The Commission also has 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 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 initial 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. The FCCPA prohibits conduct or any coordination between competitors including on the platform of trade associations. 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. Coordination in increasing prices (otherwise known as cartel) is an unambiguous infringement of the FCCPA. Further, the current and prevailing 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. 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. As such, the Commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation with respect to this subject.
Although 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 the circumstances, the Commission is in addition to engaging the relevant stakeholders entering and dispatching interim orders under Sections 17(a),(e),(l),(s),18(3)(a), 157 and 158 of the FCCPA prohibiting the performance or continuation of any agreement or arrangement associated with, or resulting from discussions, deliberations, debates, argument or resolutions of/at any meeting of the AON or its members regarding any increase in air fares and or any conduct not necessarily directly in compliance, but in response to changes in the market on account of a compliance by others.
According to Airline operators tickets prices started from N27, 500 up to N35, 000 before it was increased to minimum of N50, 000. “Everyday you have to plan for importing spare parts, which is in USD and you cannot get such money from the government. It’s only from the parallel market. Also A-jet fuel is in the higher price. “Handlers have increased their charges, even the government has increased its charges. So, based on the above explanation how can airlines survive the situation. Apart from that, they have so many responsibilities to handle, such as; payments of salaries, aircraft checks out of Nigeria, which they have to get the money from the same parallel market,“ he said. Lawan urged the government to assist airlines in some responsibilities. According to him, the airlines are looking for the way to have a breakthrough not even making profits. The Max Air Executive Director, Mr Harish Manwani said the airlines ought to increase the fare to cope with the daily expenses to survive. The executive director noted that Max Air hardly delayed or cancelled flights except for extra ordinary weather conditions.
“Even with low turnout, the airline has its flights flown the routes across the country,“ he said. An Aviation Expert, Group Capt. John Ojikutu Rtd, urged the public and the responsible authorities to have interest in the airlines` makeup areas for the sustenance of their operations. Ojikutu said he had expected the hike in the airfare about 10 years ago. “Selling air ticket at a Naira rate less than $100 for a flight of one hour makes no economic sense in Nigeria where over 20 years ago $100 was the fare. Aviation fuel was being refined in the country around 1999, whereas today we have been importing fuel for well over 10 years. Naira exchange has grown steadily from N180 to N360, N400, and now over N500 to a dollar and our airlines are selling tickets at N26,000 or in rare cases N30,000 even when we are importing fuel,“ he said.
