Experts in the aviation sector have attributed the sharp drop in domestic airfares to increased competition among airlines and the relative slowdown in passenger traffic.
From the end of year high traffic when fares on some routes were offered for as high as N65, 000 on a one-way rotation, investigations by The Nation have shown that fare offerings on some routes as of last week had dropped to as low as N23, 000.
A survey of air fares charged by local carriers last December, which oscillated around N40,000, N65, 000, N50,000 and N120,000 on Lagos-Calabar, Benin, Abuja, Port Harcourt, Warri, Anambra Owerri, Enugu has dropped significantly.
Experts attributed the decline to market forces, choice of operational equipment, operating environment, the regime of charges and marketing strategies deployed by carriers struggling to harvest from the pool of available passenger traffic.
They said the lower fare offering might be due ostensibly to low passenger traffic on some routes and the prevailing load factor for the beginning of the year when air travel experiences low activity.
But, a new trend is emerging in the sector, as some carriers are capitalising on the situation to unveil flash fares, which are lower than the offerings available at airlines’ counters.
To drive this initiative, some of the carriers put for sale some seats at a ridiculously low rate compared to what other passengers would pay as regular fare, which they have described as yield management.
But, some industry experts have described such development as a threat to air safety urging the regulatory body – Nigerian Civil Aviation Authority (NCAA), to step up its oversight duties by urgently carrying out an air transport economic audit on such carriers.
In an interview, President Aviation Safety Round Table Initiative (ASRTI), Dr Olowo lower fares calls for concern.
He said: “Local carriers charging the equivalent of $42 fare for a one on one flight on jet airplanes to me calls for attention. Please let us watch it. Let us not plan for an accident. This is a concern.”
But, Chief Executive Officer (CEO), Centurion Securities Limited , Group Captain John Ojikutu (rtd) said it was wrong for carriers to charge less than $100 on any local route.
Ojikutu said it was strange that air fares were dropping when the cost elements for airlines, their revenue management principles or choice of aircraft fleet had not altered much to achieve break-even operations with the kind of new tariff they were charging.
Justifying the new move, a spokesman of one of the domestic carriers, who pleaded not to be named, said what many industry people were describing as drop in air fares could best be regarded as ” flash sale”.
According to him, there was nothing unusual about airlines unveiling such fares.
He said: “Let me state here that there is nothing wrong with keeping 10 to 15 seats cheap for those who plan their trips. This is a flash sale not actual fare.”
An analyst, Mr Tunde Oke, said given many parameters, it would be difficult to legislate on the pricing model to be adopted by airlines in fixing air fares.
He said: “The art of pricing is democratic, not autocratic. The aviation industry in Nigeria is an open market with flexible or no price control by the regulators. Let market forces determine and exert the prices. And let regulators be concerned about safety. If an airline has not violated any safety standards, its pricing model should not be a cause for concern. Or pricing has any direct nexus with floundering safety standards? I don’t think so.
“The issue of airlines offering seats for as low as N20,000 should not be controversial. This marketing gimmick is used all over the world. Can we divorce the health of the airlines from the health of the national economy? Operators will deploy any strategy that can help get a share of the market. At the end of the day, however, there will be a systematic attrition that will reduce the airlines to the number the industry can accommodate.”
Director-General, Nigerian Civil Aviation Authority (NCAA), Captain Musa Nuhu said domestic carriers were reducing air fares due to over capacity.
As intriguing as it may appear, Nuhu said it is not in any way affecting safety of flight operations.
He, however, said the NCAA was on top of airlines’ economic regulations warning that if any operator is caught jeopardising air safety by cutting corners, the industry regulator would take the necessary step to invoke a full economic audit on such airlines.
According to him, airlines reappraise their finances and operational economics to determine a reduction of airfares based on a number of factors.
He said only airlines which have done their own business analysis could explain the reasons behind their slashing of airfares.
On the impact on air fares to safety, he said: “I believe these airlines have done their proper analyses to reduce those airfares and there are many factors, they only can explain the reasons behind their slashing of airfares.
“Maybe they have excess capacity and instead of leaving that excess capacity to go to waste they rather make some money out of it, so there are many reasons. Airlines may slash their fares; maybe they want to relate to a particular market segment after which they will adjust their fares accordingly.
“Airline finances and economics are interesting subjects and airlines have their reasons for doing that.”
On the safety level, vis a vis reduced fare he continued: “It is our responsibility to ensure they comply with all our standards and regulations and I don’t think and business will intentionally undercut themselves to the point they will not break even, I mean, let’s understand, these people have invested millions of dollars in their business, to me, it will be fool hardy to shoot yourself in the leg by cutting your airfares to the point that you are no longer profitable or break even.
“So, it is the airline that can decide and knows the internal workings, efficiencies and deficiencies that can really determine and explain the reduction in airfares.
“For us, if we see trends or indications of them trying to cut corners, then we will do a full economic audit of the airline to ensure they comply with that. So far nothing, there are many indications to show an airline has issues.”