FOREX Crisis: FG to sanction foreign airlines over high fares

The Federal Government has threatened to sanction foreign airlines that fail to comply with the directive to release low inventory tickets within weeks.

The Nigerian Civil Aviation Authority had met with airline operators, the NCAA, foreign airlines, and the National Association of Nigeria Travel Agencies in Abuja last week where the directive was handed down.
During the meeting, the foreign airlines pledged to enhance transparency in air ticketing processes by releasing low inventory tickets, making them significantly more affordable for the Nigerian middle class.

This followed the release by the Federal Government of part of the $700m trapped air ticket funds to foreign airlines.
However, findings by Sunday PUNCH showed that not all the foreign airlines had complied with the directive.
The Director of Public Affairs and Consumer Protection, NCAA, Michael Achimugu, said in an exclusive with Sunday PUNCH that defaulting airlines risked sanctions.

The NCAA public affairs director stated in an interview with one of our correspondents on Saturday, “The meeting between the NCAA and the foreign airlines had NANTA present.

“They confirmed the opening of those low inventory tickets. During our discussions with the airlines, we allowed them into the meeting one after the other and some claimed that in their agencies, low inventories were opened.
“We had NANTA confirm this in the meeting and discovered that some of the airlines were not being truthful about it. Consequently, we instructed them to open those low-inventory tickets.

“A majority of them are reported to have complied by opening low-inventory tickets. For those that are yet to do so, we have given them a week or thereabout. I will need to check with the chairman to confirm the exact number of weeks given to them to comply.
“Within the scope of the NCAA, there will be sanctions applicable to airlines that do not comply with these directives. We made that very clear. However, I need to confirm the deadline to comply with the committee.”

Investigations by Sunday PUNCH showed that airlines had initiated the release of low-inventory tickets, however, there are concerns as certain carriers have yet to offer their lowest inventory tickets.
Airline operators, who spoke to Sunday PUNCH, confirmed that the NCAA directive had not fully expanded the availability of economy-class tickets.

A reliable source in the industry told our correspondent that some of the airline operators were yet to fully open up the lowest inventory tickets, which cater significantly to the Nigerian middle class.

The source claimed that some of the operators withheld the lowest inventory tickets in a move to compel Nigerians to utilise their dollar cards to purchase air tickets.

“Some airlines did a partial opening, meaning that they didn’t release all of the low-inventory tickets. For example, if they have 10 economy class tickets with different fares, they will release around five,” the source revealed.
The Director-General of the NCAA, Chris Najomo, had called out Air France for non-compliance with the directive.
In response to this, Najomo set up a 10-member committee chaired by the Director of Special Duties at the NCAA, Horatius Egua.
The committee’s primary task is to oversee the full compliance by foreign airlines with the government directive regarding the unblocking of low-inventory tickets.

The committee is expected to propose suitable pricing strategies for tickets in Nigeria compared to other markets in the West African sub-region.

The President of the Association of Foreign Airlines and Representatives in Nigeria, Kingsley Nwokoma, confirmed to Sunday PUNCH that some airlines had chosen to open their low-inventory tickets, while others were yet to follow suit.
The AFARN president believes this move will benefit everyone, as airline operators navigate market dynamics and competition by strategising accordingly.

Nwokoma stated that making decisions for airlines was challenging due to numerous variables that needed consideration.
According to him, the decisions by the airlines to open up inventory involve evaluating both commercial and technical aspects to determine the most suitable course of action.

The AFARN president explained that the increase in ticket prices was attributed to the high exchange rate and the challenge of accessing trapped funds.

He added that airlines were keen to recover these funds.

Nwokoma emphasized the ongoing conversations between the foreign airlines and the NCAA, shedding light on the complexities involved.
“The foreign airlines are having a conversation with the NCAA. So I’m sure as soon as that is sorted, they will look at all the dynamics,” he said.

Nwokoma added that it was important to resolve regulatory matters before proceeding with ticket releases, underscoring the need for alignment between industry stakeholders and regulatory bodies.

Regarding the timeline for the release of low-inventory tickets, he expressed uncertainty, noting, “It is ongoing; we can’t give any timeframe as to when the release of low-inventory tickets will start.”

Price checks by our correspondents revealed significant discrepancies in ticket prices. While some tickets are sold at over N1m, others exceed N3m.

A round-trip economy class ticket from Lagos to London with Air France costs N2,482,138, while for Lufthansa, it is priced at N1,966,165. Qatar Airways offers the same ticket for N2,016,824, and KLM prices it at N2,448,740.

For the Lagos to New York route on Qatar Airways, the cost is N2,982,049. Meanwhile, KLM charges N3,158,314; Air France prices it at N3,148,308; and United Airlines lists it at N3,193,185. Delta Air Lines offers the ticket for N3,310,097.

The Lagos to London flight with Kenya Airways attracts N1,258,857. Asky Airlines prices it at N1,572,617, while Qatar Airways charges N1,639,602.

From Lagos to Canada, Delta Air Lines economy tickets cost N1,982,017. United Airlines charges N3,188,672; Qatar Airways, N2,511,041; and Air France, N2,660,376.

Nigerian passengers are grappling with challenges stemming from fluctuating exchange rates, resulting in increased travel costs and unpredictability.

The surge in Jet A1 fuel price further compounds the issue, with airfares across various airlines experiencing an increase in recent weeks.

The airlines have voiced their concerns about the detrimental impact of these factors on their operations, urging the government to intervene to avert the potential collapse of some of the carriers.

The President of the National Association of Nigerian Travel Agencies, Susan Akporiaye, told Sunday PUNCH that the non-release of the low-inventory tickets was due to the problem of high foreign exchange rates.
Akporiaye said there was no need for the airlines to block the lower inventory tickets anymore as the prices were becoming exorbitant.

She stated, “Before the release of inventory, the economy-class ticket was going for N6m; that’s why you can see tickets priced at less than N2m. We can obtain fares as cheap as we used to before because of the exchange rate when it was $1/N400.
“Due to the reopening of the inventory, passengers can still purchase tickets at the rate of N1.6m and N1.8m, as opposed to what we used to have before.”

An agent at Travel and Tours Limited, Maureen Chimaobi, expressed the hope that all airlines would comply with Nigerian authorities by opening up their low-inventory tickets.

She told Sunday PUNCH that the tickets might not always be available on airlines’ websites, with some airlines selling them to IATA agents at a lower cost.

Chimaobi stated that occasionally, these tickets can be found on the airline’s website.

She added that despite this availability, the prices remained high due to the exchange rate.

Another travel agent, Effiom Martins, said there were persistent high costs of airfares.

“As of yesterday (Friday), ticket prices remained exorbitant, even doubling in some cases, compared to just two weeks ago,” he said.
Martins emphasized that exchange rates played a significant role in determining ticket prices, but lamented the lack of immediate action by airlines following the directive by the NCAA.

He expressed frustration over the opacity of airline policies, noting the absence of clear communication regarding plans to lower fares.

“The foreign airlines won’t even give some of us any information on plans to reduce airfares. It will just be shown on their websites. Yesterday’s airfares and today’s fares are still the same,” Martins added.

An agent with Untamed Travels and Tours, Adediran Adewale, disputed claims of inventory release by the international airlines, labelling it “a capital lie.”

He pointed out pricing disparities, particularly with airlines like British Airways selling tickets in dollars for passengers in Nigeria.

Adewale criticised Turkish Airlines for selective inventory release and the cessation of commission for agents, which he noted was adversely affecting travel businesses. He emphasized the unequal treatment faced by Nigerian travellers, citing restrictive baggage allowances and pricing schemes.

A Travel Agent at T & T Concierge Services, Juliet Abah, acknowledged partial inventory releases by some airlines like Lufthansa and Virgin Air but lamented the lack of action from others such as KLM and Air France.

“Not all but some airlines have released cheaper classes of seats. The likes of Lufthansa, Virgin Air, KLM and Air France have yet to do the same,” Abah stated.

She highlighted the intricacies of fare determination, citing fluctuations in IATA dollar rates and disparities between Nigerian and international markets.

One of the biggest tasks currently before the Minister of Aviation and Aerospace Development, Festus Keyamo, is to ensure that more airlines do not suspend their operations from the Nigerian market.

Recently, the Chairman of United Nigeria Airlines, Obiora Okonkwo, expressed worry that operators were on the brink of collapse as operating costs continued to worsen, especially due to the high cost of aviation fuel, which is currently sold at N1,300 per litre.
Okonkwo stated, “A Nigerian airline may meet their terms and all the standard criteria, but the aircraft owners consider country risk above other factors. Country risk supersedes everything and lessors have their obligations. So, there is nothing personal.
“Some airlines deposited money with the Central Bank of Nigeria, but they cannot provide us the needed dollars.

“We are not only faced with the problem of scarcity of dollars; even the aviation ecosystem is feeling the heat. Handling companies have increased the cost of their services, airports have increased their charges and those that service the aircraft have also increased the cost of their services.

“The funds for these payments are coming from the passengers who are already exhausted financially.”

Earlier, the Chief Executive Officer of Centurion Security Limited, Captain John Ojikutu, said aviation fuel accounted for approximately 60 per cent of airlines’ operational costs.

He highlighted the need for Nigeria to resume producing aviation fuel, as it did in the past, to alleviate the ongoing impact on both operators and passengers.

“Fuel plays a crucial role in commercial aviation. Could you provide information on the fuel prices in 1999 and the current rates? In the mid-1990s, fuel refining occurred in Nigeria, but for over two decades, we’ve been importing fuel, which is now impacting ticket prices,” Ojikutu stated.

He said it was challenging for airlines to continue to pay in dollars while they collect naira from travellers.

The Federal Government holds the highest amount of airline-trapped funds in the world, with over 27 foreign carriers operating in the country, according to the International Air Transport Association.