Foreign airlines operating in Nigeria have begun to unblock their low-priced fares on Nigerian routes as the Central Bank of Nigeria completes the payment of about $7bn backlog, which includes over $700m unremitted ticket revenue.
The CBN had about two weeks ago announced the completion of
payment of $7bn legacy debt, which included FX forward contracts among foreign
exchange-denominated debts.
The CBN, however, declared about $2.4bn of the $7bn debt
invalid, saying it could not be verified due to improper documentation among
other infractions.
The International Air Transport Association, the trade body
representing foreign airlines, has yet to verify the clearance of the entire
$700m but findings showed on Saturday that the foreign carriers had begun to
unblock their low-priced tickets.
To maximise their yields, foreign carriers had over 24
months ago blocked their low-priced tickets on Nigerian routes after ticket
revenue running to hundreds of millions of dollars became trapped in Nigeria.
The development led to a sharp increase in fares on the
Nigeria routes and was exacerbated by the sharp depreciation of the naira
against the United States dollar, with economy fares on popular destinations
such as the Lagos-London-Lagos route going for over N3m.
The CBN began the gradual clearance of the debt but the new
administration of the apex bank later fast-tracked the payment, leading to
clearance of major parts of the debt between late last year and so far this
year.
Following the CBN announcement of the clearance of the $7bn,
findings revealed that most of the airlines had released their low-priced
fares.
The development was confirmed by the Chairman of the
National Association of Nigerian Travel Agents, Susan Akporiaye.
She, however, revealed that virtually all the foreign
carriers opened their low fares before the CBN announcement of the payment of
the $7bn about two weeks ago, adding that low fares were opened about two weeks
before the apex bank announcement.
Akporiaye said, “All of them (foreign airlines) have opened
up all the inventories before the final backlog of forex was cleared. It is not
now that it was cleared. It was cleared earlier in March.
“It is the only airline that has not done that. All of them
have opened up all the inventories before the final forex backlog was cleared.
“We had a few that had issues – the unverified ones. There
were some transactions for which some documents were not available. They were
unverified. And those that were not cleared in February because they were
unverified are those that have just been cleared.”
The NANTA chairman pointed out that one foreign airline had
yet to open up its low-priced tickets, saying, “Before this final clearance,
the airlines had already reduced inventories, except for one airline, which I
won’t mention due to privacy, and I’m sure that the reason why they haven’t
complied is a management thing.”
She emphasised that the airlines had been cooperative, but
challenges such as unverified transactions caused delays.
“The money the airlines are saying that they are still owed
is money with the commercial banks and not with the government, because
commercial banks are private. They are not government entities,” Akporiaye
added.
Findings by Sunday PUNCH showed that commercial banks were
still reconciling with the foreign airlines with a view to clearing the final
payment following the announcement of the clearance of the final backlog by the
CBN two weeks ago.
“At times, the commercial banks are slower than the
communication from the CBN. We will ask the airlines to contact their banks and
we will have a clearer position. Then we will be able to respond to your
inquiry based on verified data,” an IATA official told one of our
correspondents on condition of anonymity because the official was not
authorised to speak on the matter.
An IATA spokesperson confirmed the development, noting that
the body would come with its position on the matter soon.
“IATA is engaging with its members on the situation
regarding blocked funds in Nigeria,” a spokesperson for the global body in
Geneva said when an update was sought following the CBN announcement.
However, findings showed that the airfares on the Nigerian
route recorded a drop despite the opening of low inventories by foreign
carriers.
This was confirmed by the NANTA chairman, Akporiaye.
“The release of lower inventories will not necessarily make
airfares low because of the rate of exchange,” she noted.
Our correspondents discovered a notable difference in the
costs of air tickets sold on March 4, 2024, compared to those on Saturday.
As of Saturday, the round-trip economy class ticket from
Lagos to London varied in cost among different airlines.
RwandAir Express offered it at N1,102,563; Royal Air Maroc
at N1,628,675; and Ethiopian Airlines at N1,641,249.
However, on March 4, 2024, a round-trip economy class ticket
from Lagos to London attracted significantly higher prices. Air France priced
it at N2,482,138, while Lufthansa offered it at N1,966,165. Qatar Airways
provided the same ticket for N2,016,824, and KLM priced it at N2,448,740.
The average fare for flights on March 30 amounted to
approximately N1,457,495.67, reflecting a decrease from the prices observed on
March 4, which averaged approximately N2,478,466.75
This price drop represents a 41.19 per cent decrease in the
cost of round-trip economy class tickets from Lagos to London.
A trip from Lagos to New York also recorded a drop in fare
in the same period.
For the Lagos to New York route on Qatar Airways, the ticket
was sold for N2,982,049 as of March 4. However, as of Saturday, it was sold for
N1,989,098.
KLM charged N3,158,314; Air France priced it at N3,148,308;
United Airlines listed it at N3,193,185, and Delta Air Lines offered the ticket
for N3,310,097, on March 4, 2024.
Agents speak
A travel agent with Fadpaulo Travel and Tours Limited,
Fadeyi Paul, expressed concerns about the actual impact of the low inventory
fares on consumers, saying, “It is still on the high side; there are no low
inventories yet. Like Lufthansa.
“But the European airline that I worked with a few days ago
has low fares.”
He noted that despite the appearance of low fares, taxes
attached to the fares often inflate the final cost for travellers.
Paul stated, “Moreover, the ones which have low inventories,
the taxes attached to them are high? They find a way around it and make you
still pay one way or the other. If you see a fare that costs $211, you will
still end up paying N1.4m.
“So some of them have released low inventories but still
make taxes high. So they have a way of working around it to get their money
back.”
Another travel agent, Enebeli Alloy, acknowledged that
airlines were indeed releasing cheaper fares but noted that the rates were
still relatively high.
“The airlines are complying. They are releasing some cheap
classes on the system now. The only complaint now is that the rate at which
they are selling is still high. But I believe it will reduce gradually. It
won’t be done overnight.”
Adewale Adediran of Untamed Travels and Tours echoed similar
sentiments, stating, “The inventories have been released although not all, but
it is better than what we were experiencing before now.”
Adediran raised concerns about the significant fare
differences between travelling from Nigeria compared to neighbouring countries
on similar routes.
“The fares are on the high side compared to our neighbouring
countries. For example, if one is travelling from Lagos to London and Cotonou
to London with the same airline and at the same hour, what they are charging
there is lower than what they are charging here. They need to work on that
situation,” he added.
Sanction threats
The Federal Government had earlier this month issued a
warning to foreign airlines regarding the release of low inventory tickets,
threatening sanctions for non-compliance.
During a meeting with the Nigerian Civil Aviation Authority
and aviation stakeholders, foreign airlines pledged to enhance transparency by
making low-inventory tickets more accessible to the Nigerian middle class.
The Director of Public Affairs and Consumer Protection,
NCAA, Michael Achimugu, told The PUNCH that the meeting had in attendance
representatives of the National Association of Nigerian Travel Agencies.
While some airlines claimed to have opened low inventory
tickets, NANTA confirmed discrepancies, leading to instructions for all
airlines to comply.
“A majority of them are reported to have complied by opening
low inventory tickets. For those who have yet to do so, we have given them a
week or so,” stated Achimugu.
He also mentioned that sanctions would apply to airlines
failing to comply, pending confirmation of the exact deadline.
The government had recently disbursed part of the $700m
trapped air ticket funds to foreign airlines, signalling ongoing efforts to
address aviation industry challenges. PUNCH
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