Air Peace, a Nigerian indigenous airline, finds itself in a prolonged market battle with numerous foreign airlines that have extensive experience in the industry, following its launch on the Nigeria-London route. New competition on international routes has been ignited by Air Peace’s introduction of flights on the London route and the strengthening of the local currency, as reported by Justice Okamgba.
Nigeria’s indigenous airline, Air Peace, may face a
prolonged market battle with many foreign airlines with decades of experience
in the industry following its debut on the Nigeria-London route.
Analysts and industry experts who spoke to The PUNCH on
Thursday said the airline required support from the government and a strategic
approach to stay competitive.
The strategic move has garnered high praise from
stakeholders in the aviation sector, considering that Nigerians were paying
exorbitant prices to travel from Nigeria to London. But, sustaining this
momentum will require more than just offering low prices, analysts said.
On March 31, 2024, the 11-year-old airline made a bold
statement with its inaugural flight using a Boeing 777 aircraft, offering a
capacity of 274 seats and carrying 260 passengers from Lagos to London.
It sold its tickets for N1.2m, a price way lower than the
rates offered by most foreign airline operators plying the same route.
Just two weeks after entering the market, Air Peace’s Chief
Executive Officer, Allen Onyema, complained on Arise TV that foreign airlines
were undercutting prices in an attempt to push Air Peace out of the market.
Onyema said, “We are aware that there are devilish
conspiracies. All of a sudden, airlines are pricing below the cost. One airline
is advertising $100 and the other $350.
If you peel up your entire aircraft and carry people on the wings, it is not
even enough to buy fuel.
“Why are they doing that? Their government is supporting
them because Nigeria has been a cash cow for everybody. The idea is to take Air
Peace out, and the moment they succeed in taking Air Peace out, Nigerians will
pay 20 times over. It would happen, God forbid, if they were able to take Air
Peace out.
The PUNCH gathered that an economy ticket for a flight
scheduled for April 29, 2024, from Lagos to London costs about N679,375 on
Ethiopian Airlines, an operator with 75 years of experience.
Air Peace priced the same ticket at N1,090,750. The
difference is that on Air Peace, it will be a 6-hour non-stop flight, while on
Ethiopian Airlines, it will take 16 hours with one stopover.
Last Friday, Ethiopian Airlines reduced the price of its
London ticket by 0.77 per cent to N1,628,660 from N1,641,249 two weeks ago.
In the same period, Air France’s price dropped to
N1,687,824, nearly halving from last month’s N2,482,138.
On March 4, 2024, Lufthansa offered the Lagos-London route
for N1,966,165. Qatar Airways provided the same ticket for N2,016,824, and KLM
priced it at N2,448,740.
This continuous decline in air ticket prices was also driven
by the strengthening of the naira against the US dollar and the payments of
airlines’ trapped funds by the Central Bank of Nigeria.
Earlier this week, the Minister of Aviation and Aerospace
Development, Festus Keyamo, confirmed that the Federal Government, through the
CBN, had cleared all the trapped funds (foreign exchange backlogs) to the tune
of about $160m.
Beyond the ongoing price war, the Air Peace chairman also
lamented the challenges with ground handling and space allocation at the London
Gatwick Airport, adding that no airline has faced such obstacles before.
He noted, “On the inaugural flight out of London, 24 hours
before departure, the management of Gatwick Airport moved us to another
checking area instead of the designated one.
“The area they provided had a malfunctioning carousel,
forcing us to manually transport luggage 50 meters away, causing delays.”
Air Peace secured the required permits from the UK Civil
Aviation Authority to initiate flights to the United Kingdom in 2023.
The President of the National Association of Nigeria Travel
Agencies, Susan Akporiaye, said at a press conference on Tuesday that the
appreciation of the naira, and the payment of trapped funds were the key
reasons air ticket prices dropped.
Akporiaye said the issue of high fares resulted in
neighbouring countries, such as Ghana and Togo, gaining traction in the travel
market, as many Nigerians opted to cross the borders for cheaper fares.
The NANTA president noted that during that period, a
significant portion of tickets were sold outside Nigeria under the term “Sold
Outside Ticketed Outside” (SOTO), benefiting travel operators financially but
resulting in a loss of tax revenue for Nigeria.
“Majority of the tickets we sold were out of Nigeria. Those
sales were not attributed to the Nigerian market.
“If we access the Ghana market or any West African country
market, they would see unusual growth, while it is a downward trend for the
Nigerian market. This is because the airlines closed the lower inventories
while the same lower inventories were open in other markets,” the travel agent
stated.
Government support
The President of the Association of Foreign Airlines and
Representatives in Nigeria, Kingsley Nwokoma, told The PUNCH that Air Peace
needed patriotic support from both Nigerians and the government to sustain the
airline’s entrance into the market.
He said government officials should consider setting an
example by choosing the carrier for their foreign trips.
According to Nwokoma, such a move not only demonstrates
confidence in Air Peace but also contributes to its growth and sustainability.
“Nigerians should be more patriotic; an Ethiopian will fly
Ethiopian Airlines, and Kenya will fly Kenya Airlines. This patriotism is what
we need. Until we become more patriotic, things won’t be better.
“The government should make sure that all the travelling
officials make use of Air Peace. If it is London or wherever they should
support the airline,” he remarked.
However, Nwokoma posited that the government was not in a
position to determine prices for foreign airlines, as there was room for all
players to thrive.
“Competition is competition. The Federal Government cannot
tell foreign airlines how to fix their prices. The market is big enough for
everybody to play. If Nigerians can collectively support Air Peace, then that
would be fine.
“I would be happy too if I saw other carriers flying that
same route. It is good for the passengers to have options,” he stated.
Air Peace had consistently acknowledged that it was getting
support from the Nigerian government but had called for more as the price war
continued to play out.
At the inaugural flight, Aviation Minister Keyamo, the
Minister of Industry, Trade and Investment, Doris Uzoka-Anite, the acting
Director-General of the Nigerian Civil Aviation Authority, Chris Najomo, and
other government officials were present to offer their support.
The airline CEO said, “The government of Nigeria is behind
Air Peace, but the government has to do more now that there is evidence that
unofficial statements are taking this airline.”
The Managing Director of Sub-Saharan Africa, Untamed Ltd,
Isidore Ogunjiofor, told The PUNCH that Air Peace should start targeting other
international destinations while it keeps demanding support from the
government.
“I know the folks at Air Peace are smart, but they need the
support of the Federal Government, which Onyema confirmed they are getting even
more now. Consumers’ preferential patronage will not be enough to help Air
Peace win the war.
“Air Peace should now target destinations like China, the
US, India and regional routes that will make Nigeria a hub for their
operations,” Ogunjiofor said.
Strategy
The Managing Director of Karamba Associates, Daniel Young,
told The PUNCH, “There has to be a stronger strategy other than pricing to
become resilient in that market. It won’t be good to see Air Peace chicken out
of the market like that.”
According to Young, the battle is going to be more intense
for the airline, and having laid down strategies that are appealing to
Nigerians could guarantee sustainability.
“He used a price slash to venture into the market, those
foreign airlines are not going to sit back and watch Air Peace take over the
market.
Air Peace is playing home, and they are aware that each of
those sides has advantages and disadvantages. So, the question is: what will
the airline offer Nigerians based on its cultural background to make it more
appealing?
“Then you have to ask, is the airline willing to listen to
suggestions? If yes, then they will likely come up with stronger strategies. If
I am willing to pay N600k to the UK and you offer me additional benefits when I
return to Nigeria, let’s say 1 free night in a hotel in Nigeria. This is just
an example. The real thing is that they have to think outside the box,” he
expounded.
Young also faulted the Air Peace chairman for revealing some
of his strategies to the market.
“You cannot come on national television to start saying some
things you should have kept to yourself. I think he should assemble a team of
marketing experts who can ensure that he stays afloat in that market. We all
want this airline to succeed,” the Karamba Associates boss posited.
Last week on Arise Television, Onyema, revealed that Air
Peace had sold tickets for Lagos-London flights until September.
He also mentioned that the airline owned over 30 aircraft
and had placed orders for 33 more.
He said, “At the end of the day, Air Peace will be owning
over 60 aircraft. “ When you say what it has been like, right from the day we
published our fares, even that inaugural flight got sold out within days.
“It got sold out in days and even up to September. So, the
traffic is there; however, the last 48 hours have not been easy,” Onyema
stated.
A public affairs analyst, Reno Omokri, stated on LinkedIn,
“The Air Peace CEO is charming and suave. He is a good brand ambassador for his
airline. However, he Is not a public relations expert.
“As a result, he makes unforced errors, resulting in his own
goals. One such is his statement that Air Peace’s Lagos to London route is
completely sold out until September 2024.
“His recent complaints alleging that foreign airlines have
initiated a price war against him, where he claimed selling out until September
slightly less credible and more challenging to believe.
“Because you cannot launch a price war for flights in April
and May for tickets already sold out until September.”
Analyst and author of Burning Savana, Chikwendu Anugba, told
The PUNCH that implementing measures such as tax breaks specifically for the
London route could provide Air Peace with the leverage to compete effectively
against larger foreign carriers.
Anugba said that just as foreign airlines may benefit from
subsidies or other forms of support from their governments, Nigeria must
explore similar avenues to bolster the competitiveness of its own airlines.
The government provided forex subsidies to Dangote for its
cement factories in Africa, illustrating how targeted support could facilitate
the growth and expansion of local industries, the analyst noted.
According to Anugba, Air Peace can’t survive the price war
without government support.
“The government needs to step in and provide support for the
local airlines on that route. It can provide a tax break for the London route
for Air Peace.
“Immediately, Air Peace is no longer able to compete with
these bigger airlines, who are ready to compete at a loss, the price goes up
again, and they will recoup what they lost.
“The government needs to provide Air Peace with incentives
to sustain this fight till the foreign airlines acknowledge the presence of Air
Peace on that route and the price becomes fair and reasonable,” he declared.
He noted that it was a common practice for countries to
subsidise their firms to make them more competitive.
“All those foreign airlines competing on that route enjoy
one form of subsidy or another from their governments.
“Ghana, for instance, can impose a tariff on Dangote Cement
in Ghana to neutralise the advantage it gets from the forex subsidy the
Nigerian government gives it.
“Governments subsidise their firms. A tax break is a
subsidy. An outright grant is a subsidy. A loan is a subsidy,” Anugba
explained. THE PUNCH
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