FCCPC, airline operators at war over airfare pricing
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By Dickson Omobola & Matilda Ikediobi
Federal Competition and Consumer Protection Commission, FCCPC, and the Airline Operators of Nigeria, AON, are at odds over the pricing of domestic air fares.
The FCCPC, on Thursday, faulted some airline operators for what it described as opaque pricing and hidden charges, and raised concerns about what it termed the abuse of dominance on specific routes by some of the country’s airlines.
However, domestic operators countered, saying that as long as operating costs and interest rates remain high, air fares in Nigeria would continue to rise.
The debate took place during a Webinar themed: Aviation Town Hall: High Air Fares – Are Airlines Really the Problem,’ organised by Avaero Capital Partners and aviation expert, Alex Nwuba.
Speaking during the virtual meeting, FCCPC’s Executive Commissioner (Operations), represented by the Director of Corporate Affairs, Ondaje Ijagwu, also disclosed that an ongoing investigation into price-fixing in the sector was underway.
Ijagwu said, “We also have an active investigation ongoing, but we won’t be speaking so much to some of these issues in detail. We are told that a number of factors occasioned that rise (Yuletide fares). One of the reasons we were given for the December rise was the fact that there was multiple taxation, and airlines said a whole lot was being paid to the government.
“When we talk about the behaviour of air fares and airline operations in Nigeria, the behaviour of airline operators is already quite implicated. The reason is that, even when you want to book a flight, you will find the information opaque.
“If you book your flight, particularly for clients who are outside our immediate environment, you would see that a whole lot of things are listed as part of the charges. If you pay a tax when you obtain a ticket, you will see it clearly stated there. If there are other charges, you will also see them and the base fare clearly stated, so whoever is making this purchase will know these are the various components.
“But in a situation where there is asymmetry of information, consumers definitely will begin to ask questions as to why fares are rising. The interface between consumers and flying is with airline operators; the government does not interface directly with consumers in that respect. Whoever will be taking the hit will definitely be the operator himself.”
On airlines allegedly abusing their dominant positions on certain routes, especially during festive periods, he said: “We have a situation where we have dominant players, and they abuse to some extent, allegedly anyway. From what we gather from consumers, it seems there is abuse of the dominant player’s position. When we talk about dominance in this sense, the market could be segmented. For instance, you could have a route to the southern part of Nigeria, particularly the South-East.
“During festive periods, when we look at that, there are airlines that may clearly be said to be dominant players in that respect. And because, for instance, you can exist and have a captive consumer community that, even if they want alternatives, can’t get them. When there are dominant players, and people do not have alternatives, we can do certain things the way we do them.”
Spokesperson for the AON, Professor Obiora Okonkwo, who spoke during the meeting, however, said: “The cost of operation that applies in Nigeria is similar to the cost of operation that applies in other parts of the world, which are jet fuel and maintenance, among others. If you have your aircraft maintained per cycles or per calendar, these are strictly OEM-driven.
“There is no maintenance system that is designed for Nigerian operators. These things remain constant and are very expensive. We still maintain that the cost of airfare in Nigeria is mainly due to operational costs, multiple charges, and high interest rates.
“So far, operational costs remain high, interest rates remain high, and the fare in Nigeria will continue to be higher. However, we fly comparatively few people, as do most parts of the world. I still think that even for what we go through, and because we are very sensitive to the cost of living in Nigeria, we do as much as possible to reduce and not go overboard with the air fares.”
Meanwhile, the Chief Executive Officer of Omni-Blu Aviation Ltd, Engr Akin Olateru, said: “Airfares during Christmas and New Year are always a big deal anywhere in the world. It is not just down to the airlines. Even hotels are more expensive during Christmas and the New Year. Why are airfares expensive in Nigeria? Airlines in Nigeria face two major problems. One is forex. Also, interest rates are high.
“There is no business set up as a charity; we need to work on this interest rate. Now, the importation of spare parts. I don’t know if people have noticed, but most scheduled operators in Nigeria today have one aircraft packed and use it as a spare. There is also the issue of airport infrastructure, which affects aircraft utilisation. Aircraft cost is still there. It’s still part of the cost for the operator.”
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