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Air Peace’s Expansion, Naira Rebound Deepen Competition On International Routes

Air Peace’s commencement of flights on the London route and the recovery of the local currency have sparked fresh competition on international routes.

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 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.

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.

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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 us 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

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?

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“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 said 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.

Source: Punch

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