State-owned airlines ignite price war, slash fares on secondary routes

The recent inauguration of state-owned airlines across several Nigerian states has ignited competition on routes that were previously serviced by only one or two carriers.

This competition has forced down ticket prices, thereby expanding consumer choice, stimulating latent demand among travel enthusiasts and generating employment opportunities.

The Akwa Ibom government pioneered this initiative with the launch of Ibom Air, achieving milestones including substantial fare reductions on the Lagos-Akwa Ibom corridor, the upgrading of Akwa Ibom Airport, and the commencement of a state-of-the-art Maintenance, Repair, and Overhaul (MRO) facility.

This catalyst prompted neighboring Cross River State to establish Cally Air in July 2021, and within a year, Enugu, Ogun, and Ebonyi States followed suit with their own aviation ventures. Most recently, Bayelsa State commenced commercial operations with its inaugural state-owned aircraft, further intensifying the competitive landscape.

While critics argue that state funds might be better allocated to infrastructure and public services, proponents contend that these airlines have dismantled monopolistic practices on secondary airports, resulting in lower fares and enhanced service quality.

Olumide Ohunayo, industry analyst and director of research at Zenith Travels said the trend is what the market needs especially at a time when prices of tickets continue to increase.

“I encourage this trend and I wish more states will join in the establishment of local carriers. Maybe this will bring about the needed corporation and consolidation since the regulatory side has not worked,” Ohunayo explained.

“What we will thank them for is that they have helped in slashing fares. We knew what it was like to fly into Enugu in the past; Enugu had the same problem as the Ilorin passengers. Now UMZA Air has gone to Ilorin and the fares there have dropped. Once supply outweighs demand, you will see the difference in fares but when the demand is higher than supply, the passengers suffer.”

He advised that the airlines should consider collaborating with other airlines as this will further help the industry and the secondary airports to reduce the pains of passengers and boost scheduled reliability and low flight schedules.

“This trend would also help to develop other routes outside the trunk route. You would see some flights linking from States to states without coming to Lagos, Abuja and Port Harcourt and that is what we are waiting for.

“I know that somewhere along the line, they would have to look at what Ibom Air has done, how they have made the airline commercially driven and tied it to Ibom Airport development and other activities around tourism. This should be the goal,” Ohunayo said.

BusinessDay had earlier reported that passengers travelling from Lagos to second-tier airports such as Ilorin, Akure, Anambra, Benin, Katsina, Sokoto, Ibadan and Yola amongst others have continued to pay exorbitant fares owing to absence of competition on the routes.

Findings show that only a very few airlines operate into these routes, thereby stifling competition as airlines arbitrarily fix prices, arguing that most of these airports are not profitable because of low passenger traffic from them.

However, stakeholders argue that if more airlines are competing on these routes, prices would reduce and more passengers would be able to travel through these airports.

Before Enugu, Cross River, Ogun and Ebonyi States joined the party of state-owned airlines, one-way economy class tickets to these destinations cost between N200,000 to N350,000 even when it was not the festive season.

Whereas, before Christmas, a one-way economy class ticket from Lagos to farther destinations like Abuja, Port Harcourt, Kano and Owerri cost an average N150,000 to N200,000 depending on time of travel and the airline.

However since these few airlines came onboard, fares on these secondary routes have reduced to about N150,000 except for the festive season.

Stakeholders argue that despite the presence of these new airlines, there is still shortage of supply as flights to these secondary airports are currently fully booked for Christmas.

Seyi Adewale, the chief executive officer of Mainstream Cargo Limited told BusinessDay that the emergence of State-owned airlines would significantly benefit the passengers because air fares in/ out of the investing states are subsidized in order to generate throughput into these states, attract business travellers, tourists, investors, the federal government or political party patronage.

He said this would directly assist the ‘wellness’ of the entertainment, leisure, and hospitality sectors.

“Furthermore, it helps connect the dots within states and inter alia the Nigerian aviation space since the Federal Airports Authority of Nigeria (FAAN) and the Nigeria Civil Aviation Authority (NCAA) are Federal Agencies that have direct oversight functions over these states sponsored airports and airlines,” Adewale said.

He said the trend will further directly assist connectivity to international airports and potential possibilities for code share or interline arrangements with bigger international carriers.

It is anticipated that this new airports/airlines will attract new travel enthusiasts, and create opportunities for job seekers that would be trained in passenger and cargo handling, flight dispatchers; support services providers; offer great opportunities to other needed professionals; and generate good multiplier effect within the sector (ground handling, catering, travel & tours, leisure & hospitality),” Adewale explained.

John Ojikutu, industry expert and the CEO of Centurion Aviation Security and Safety Consult however argued that the projection of passenger traffic in 2000 for 2020 was 20 million but in 2025, the traffic is still below the 20 million projection and yet there are rises in the number of airlines and airports.

“All these are political projects in political competitions. What traffic is there for Ebonyi and Enugu Airlines and Airports in the South East where there are Owerri and Anambra Airports that collectively have not recorded up to 1.5m passenger traffic? Asaba is not farther to Onitsha as Anambra Airport.

“Same with Ibadan and Akure by the side of Lagos where both have not collectively had up to 250,000 annually and Ogun is coming to compete with Lagos the major commercial centre of the country,” Ojikutu further argued.

He called on the NCAA to do more than it is doing on the oversight and enforcement of the regulations on airports and Airlines development and establishment.

No sooner the new operators come up, the next they want is government intervention funds or exemption of charges on their operations as if they never read the Commercial and Economic Regulations on their services,” Ojikutu said.

Culled from businessToday