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Airlines may be reaching limits of passenger tolerance for high fares

In a region where affordable airfares have remained elusive, many potential customers have long been deprived of the opportunity to travel by air. Presently, a one-way ticket from Lagos to Abuja could go for as high as N100,000 or more – which is way too expensive for the average Nigerian, writes WOLE SHADARE

Skyrocketing fares

Airfares are becoming more expensive on domestic routes. Many factors have been attributed to the adjustments in fares. These factors have put airlines in a serious situation and are now caught between increasing fares ‘arbitrarily’ or losing passengers.

The recent subsidy removal on petrol by the Federal Government of Nigeria has made travelers weigh their options. Road transportation to the Eastern states of Nigeria from Lagos has jumped from N9,000 to about N21,000. The same goes for trips to Abuja and many parts of the North from Lagos. It even costs more to travel by road these days because of the increasing threats on the roads.

Nigerian airlines

No fault of airlines’

The fact, however, is that airlines are not entirely to blame for the skyrocketing airfares. The exorbitant cost of aviation fuel, also known as Jet A-1, has contributed significantly to high-ticket prices.

From N350 per litre in January 2022, Jet A1 price escalated to as high as N850 per litre later in the same year 2022. While Jet A-1 fuel prices have been on a decline in 2023, they are still not close to where they should be when compared to international benchmarks.

In addition, the volatility of the Naira against the US dollar combined with expensive maintenance done abroad due to poor infrastructure here at home has further exacerbated the situation.

Trips of less than one hour now go as high as N75,000 and N80,000 and could be as high as N90, 000, N100, 000 depending on the time of purchase. The thought that airfares would go down should be perished.

Rise in fares inevitable operators admit

Spokesman of Airline Operators of Nigeria (AON) and Chairman/CEO of United Nigeria Airlines, Prof. Obiora Okonkwo stated recently, “Obviously, the rise in fares to N100,000 for one hour flight is inevitable. I can tell you that all the airline operators, in the last three months, have been losing money, a huge amount of money. There is too much stress on the operational fronts for them to break even.”

“Even if aviation fuel is made available, there must be a review to reflect the minimal operational cost. We are offering patriotic services to the nation and understand the essential part of it. We are part of this economic development process in Nigeria but it is coming at a very huge sacrifice.”

Tough decision

Can the airlines in view of huge costs raise fares further? It would be akin to choosing between the devil and the deep blue sea. While passengers’ propensity to fly has reduced significantly, raising fares at this critical time of serious economic crunch would push travelers away from air travel. Only people who can afford it would choose to fly as many people would cut down on their trips. Many are already doing that by prioritizing their movements.

Much of the movements recorded in Lagos pertain to corporate travellers in the middle and high-income categories; Lagos houses much of this group in Nigeria given its status as a megacity.

Some existing Nigerian airlines

In Abuja, passengers are mostly top government and private sector workers, while Port-Harcourt travellers thrive on the oil economy. The lower middle class where great potential for the market exists generally does not find airfares affordable. They, therefore, resort to corporate road transport services.

Propensity to fly

In any given market, the propensity to fly (number of air trips per capita) strongly determines future demand for air travel among business and leisure travelers.

No fewer than 14 million air travellers both domestic and international went through Nigeria Airports in 2022, according to figures from the Nigeria Civil Aviation Authority (NCAA).

This story is a paradox of sorts, given that the geography, as well as the demographic profile in Nigeria, favours air travel.

The country has a working population of over 80 million, which, in addition to the fact that there are substantial inter-city distances, should favour the propensity to travel by air. The low Gross Domestic Product (GDP) per capita probably provides some explanation for the low propensity to fly.

Pakistan has a lower GDP per capita and still manages to record a higher flight propensity than Nigeria. The number of active domestic airlines is also lower in Nigeria than in other countries, again indicating the low level of demand for air travel.

Dubai, a city and emirate in the United Arab Emirates had 3.137 population. The Dubai Airport handled 66 million passengers in 2022.

More than one-third of the Nigerian passenger traffic is handled by Lagos alone, and almost two-thirds of the total is served by the three airports in Lagos, Abuja, and Port Harcourt.

Airfares are observed to be on the high side. The most trafficked route in the network, Lagos-Abuja, has an average fare of N75,000 per passenger flight hour. Customer confidence in Nigerian airlines is another reason air travel demand is deemed low.

Air travel is one of the barometers to gauge the health of a nation. Whenever a country is doing well, it will reflect on the number of people that travel by air. Nigerian aviation is not a stand-alone. It is part of the bigger economy of Nigeria and contributes to the GDP. It is obvious that aviation is the quickest barometer to check any economy.

Traveller’s view

A frequent traveler and an airline owner, who preferred anonymity, said: “If you check the Nigerian travelling populace, 70 to 80 percent of those travelling are business people, as compared to the outside world where only 40 percent are business people, 30 percent tourists, and the other 30 percent are students and others.

“In Nigeria if you check the flights going to Abuja, 80 to 85 percent are on business purposes and once these people don’t have a business to do, it is obvious that there won’t be any movement because if you are not going to do business, no travelling. So it is a clear quick indication and barometer for the economy.

Green Africa sets itself apart

In spite of the prevailing stringent economic realities, one airline has set itself apart with a vision to create a “happy and better-connected world” for its customers. That airline is Green Africa, a value airline, headquartered in Lagos, Nigeria.

Founded by Babawande Afolabi, Green Africa has, since its inception in 2021, shattered long-existing fare barriers, providing affordable flight options to customers traveling to eight destinations within the country.

These are Lagos, Abuja, Akure, Ilorin, Enugu, Owerri, Port Harcourt, and Benin. However, it was in 2023 that the airline truly stood out with its groundbreaking initiatives: “The gSaverPromo” and the “Wheel of Fortune Campaign”.

The gSaverPromo encourages customers to book their tickets at least 60 days in advance, offering fares as low as N25,000. This was a cultural shift in a region where most customers typically purchase tickets just a few days before their trips. The campaign was the first in a series of exceptional and pacesetting promotions that allowed customers to travel for almost next to nothing. One of the many beneficiaries of the promo on social media said “Green Africa thank you oh. I used my N25,000 flight ticket this June. Thank you for the opportunity. -Ismail K”.

In all, the Green Africa brand has been a game-changer for the traveling public, who can now plan and book flights ahead from as low as N25,000.

As one customer succinctly puts it ‘Green Africa is affordable, on-time and I just love the crew uniform.’

Without a doubt, if Green Africa maintains this commitment to affordability and On-Time Performance (OTP), it would soon join the coveted league of top-value airlines around the world like Volaris and Indigo.

 

Last line

This basic concept of the own-price elasticity of air travel in different market segments suggests that if airfares are reduced on Nigeria’s domestic routes, demand for air travel is likely to increase since these routes are short-haul. the prohibitive costs of air travel exclude several potential consumers of the service

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