Following an investigation by the Federal Competition and Consumer Protection Commission, FCCPC, that established evidence of price manipulation by some domestic airlines during the Yuletide season, Airline Operators of Nigeria, AON, has raised concerns over the agency’s interference in ticket pricing, saying it is detrimental to the survival of domestic operators.
AON, which dismissed the outcome of the probe, said FCCPC lacked knowledge about the economics of airlines and did not possess the professional expertise to engage in how airlines fix prices.
The commission’s Director of Corporate Affairs, Ondaje Ijagwu, in a statement released after the probe conducted by the commission’s Department of Surveillance and Investigations, using pricing data obtained from domestic airlines, said airfares during the festive window were significantly higher across several routes, despite relative stability in key cost drivers such as aviation fuel prices, government charges and foreign exchange rates.
The statement said: “The differences observed in fares therefore appear to reflect airlines’ arbitrary pricing decisions, including yield management and capacity allocation, rather than any variation in regulatory fees.
“Route-level analysis shows that higher fares coincided with periods of reduced seat availability during predictable seasonal demand peaks. On some high density routes, peak fares were clustered within relatively narrow ranges across several operators.”
Reacting to FCCPC’s preliminary analysis, Spokesperson for AON, Professor Obiora Okonkwo, said: “I have not read the details of the report but what the FCCPC is doing is very detrimental to the survival of domestic operators. They don’t know the economics of airlines and do not possess the professional expertise to dabble into how prices are fixed. They don’t understand airline operations and as far as the AON is concerned, they are playing to the gallery and should not be taken seriously. We have immense respect for all government agencies but we would not accept any statement not based on realities or facts.”
During Yuletide some domestic airlines raised ticket prices to some routes, especially the South-East and South-South regions by over 131 per cent.
For instance, findings by Vanguard showed that a one-way economy ticket from Lagos to Asaba in Delta State moved from N147,000 to N337,500.
Also, Lagos to Enugu and Benin in Edo State on a one-way economy ticket on the carrier moved simultaneously from N145,000 to N335,500, while Abuja to Benin increased from N145,000 to N335,500.
At the time, Okonkwo had also dismissed claims of price fixing, saying demand for flights was higher and there was a need to meet the demand.
He said: “In aviation, there is a formula in which fares are determined. You have different classes. You have low, middle and so on and so forth. You might have about six classes of tickets. At the end of the day, we make a yield.
“We put it all together and divide it by the number of the seats in the aircraft, including even vacant seats. For that ticket you are talking about N400,000, we might have sold a seat for N150,000. You have to sell in terms of number and in terms of cost to be able to break even and you still have to be able to service the aircraft.
“We buy aircraft from the same market (bigger airlines outside Nigeria). We buy spare parts from the same market. It is the same amount of money we pay pilots, even if they are Nigerian pilots. The cost of operation even in Nigeria is higher.”
VANGUARD.
