Will Airfares Really Tumble in Nigeria?
Before the emergence of the COVID-19 pandemic, the global aviation industry experienced a significant surge in revenue generation in the last ten years. As the figures begin to improve rapidly, an estimate suggested that by 2026, the industry would rake in nothing less than $1 trillion, and thus engender a significant impact on the world Gross Domestic Product (GDP).
The global annual growth rate for the industry between 2009 and 2017 was 5.9%, making it $754 billion by the end of 2017. This figure skyrocketed to $838 billion in 2019. In 2020, airlines across the globe anticipated generating nothing below $872 billion.
But something happened. World Health Organization (WHO) officially declared COVID-19 a pandemic on 21 March 2020. Ever since, the global economy has never remained the same. The aviation industry is surely one of the worst hit. Industry pundits even went as far as stating that the ‘9/11’ and 2008 global financial crises didn’t come close to this.
On 14 April 2020, the International Air Transport Association (IATA) made a public proclamation that the COVID-19 catastrophe would see the global airline passenger revenues plummet by $314 billion in 2020. This was a 55 per cent decrease when evaluated against that of 2019.
To accentuate the effect, Warren Buffet sold his firm’s holdings in the four major U.S. airlines (Delta Airlines, American Airlines, Southwest Airlines and United Airlines), which was a stark warning to all the major players in the industry all over the world.
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People could no longer travel. Governments put measures in place to curb the spread of the pandemic. Nigerian airlines had a share of their hard times. Arik Air, one of Nigeria’s largest carriers put into effect an 80% salary slash for its officials for the month of April 2020. It also mandated 90% of its 1,800 staff to go on compulsory leave without pay until further notice. The Arik example was just one of many experiences of Nigerian airline personnel in 2020.
At this juncture, it is highly imperative to understand the factors responsible for the pre-COVID-19 boom in the Nigerian aviation industry. Travellers’ disposable income was a strong factor. One cannot make so much a case for low-fare airlines, but the fare was also a factor.
Ever since the ugly pandemic reared its head, has it been all gloom and doom for the Nigerian aviation industry? Not totally. They have resumed operations and a surprise revolution is brewing. A certain young Nigerian, Babawande Afolabi appears to be the game-changer as his new Airline, Green Africa Airways officially announced its top management officials in May after securing its transport license in April 2021. The personnel are experts who have worked in different departments of aviation industries around the globe. Jag Singh, the Caribbean Airlines VP-operations came on board as its Chief Operating Officer (COO), while Bart Roberts, former VP-flight operator at JetBlue Airways got the post of safety review board chairman.
In April 2021, the airfares among domestic flights in Nigeria increased by a mind-boggling 100%, especially to cities that are destination favourites of most travellers in the country.
However, a recent development in the industry has incited a sudden change that is shaking all the tables and tumbling all erstwhile high flying prices. This change is inspired by the new company, Green Africa Airways whose boss is a young Nigerian returnee from the U.S.
Babawande used to be an investment banker in the United States before making the journey home to change the face of the aviation industry. Although Green Africa Airways will not begin full operations until June 2021, it has started selling flight tickets with the prices slashed down by 50%. This has resulted in a price war in the industry as other big players are following suit to avoid a colossal loss of passengers to their competitors.
This is a big contrast to what industry experts predicted at the heat of the virus that airline won’t budge on fares regarding fare reduction because of operational cost, and the need for a quick recovery from the austerity brought by the pandemic.
Green Africa sells airfares for Lagos and Abuja between 16,500 and 23,000 naira, while others currently bill passengers 60,000 nairas for the same destination. Flights to Ilorin, Akure, and Ondo were 50,000 in April but now 16,500 naira. These are the lowest prices in the Nigerian aviation industry compared to prices from other airlines.
The airline currently has its attention on six domestic destinations which include Enugu, Akure, Owerri, Abuja, and Port Harcourt, hoping to extend the destination reach to other destinations in the course of time.
Air Peace, one of the biggest names in Nigeria’s aviation industry, has promptly borrowed a leaf from Green Africa as it also brought down the prices of its airfares across destinations such as Abuja, Ilorin, Lagos, etc. The airline dropped the fare from Lagos to Abuja from 60,000 naira to within the range of 23,000 and 29,000 naira. The airline also cut down airfare from Lagos to Ilorin from 52,000 to 32,700 naira, even though it will start flight operations to Ilorin in June.
The spokesperson of Peace Airline, Stanley Olisa said during an interview that the airline is ready to “kick-off daily Abuja-Ilorin-Abuja and Lagos-Ilorin-Lagos flights on June 17, 2021.
“The new route further exemplifies the airline’s unwavering determination to interconnect various cities across Nigeria, while filling the gaps in Nigeria’s air travel connectivity. The flying public can start booking on our website and mobile app.”
The price war in the Nigerian aviation industry is traceable to a number of factors. The CEO of Green Africa was able to study the industry from far and near and concluded that he would be able to break the power of the cabal with the instrumentality of employment of seasoned hands; avoidance of unnecessary operational costs; solving the insecurity menace that the average Nigerian road users often face. If the average members of the populace can afford airfares, there is little or no reason to expose themselves to the dangers of road travel.
The first implication of price slash in the industry is that the Nigerian Aviation industry becomes highly deregulated and open to further price falls as travelling by air gradually becomes the norm for even the less privileged members of the society. There is no end to what healthy competition among the airlines can help citizens achieve. The country is already experiencing this in the telecommunication industry. Best price with quality service is a huge turn-on for customers in any industry. Any company that can bring both to the table becomes the darling of the people.
The price war is obviously a boost for the tourism industry as more and more fun/nature seekers will be able to reach tourist destinations in no time and with no pocket-tearing cost. What this does is to geographically shrink up the whole country into a hamlet as one can travel to any part of the country within the shortest possible time, without any fear of security breach, and at little cost.
The literal death of distance made possible by the low airfares will in the long run enhance business activities all over the country, as the speedy movement of goods and people spark off resourceful economic activities. Hence, business transactions will not have to take days before completion anymore because anyone can be present in any part of the country as early as they can hop into an aeroplane.