For the airlines to retain their customers and remain in business, they must have to reduce fares and this is what most of them have done. Now, a customer can pay N24,000, which, prior to now, was the cost of a one way ticket for a return ticket if he buys early. That is considered very cheap, given that the cost of aviation fuel and overall operation. For the airlines, it would be good to operate at low fares than to fly empty to destinations.
But the airlines do not hesitate to increase fares when they perceive high demands like during Sallah and Christmas festivities. Airlines increase their fares on Fridays, Sundays and Mondays; but generally, fares are very low when purchased early, especially online, but now, it could be as low when purchased over the counter.
Earlier this year, airlines wanted to peg minimum fare for one hour flight at N18, 000. They considered the high cost of aviation fuel; the unforeseen hiccups at the chain of supply, which made them pay more to get the product and flights cancellation, which make them incur losses. However, individual airlines considered how they would fare under such pricing and those who reasoned it would drive away their customers opted out of the arrangement.
Now, airfares could drop to as low as N12, 000 without promo. This, to industry observers is survival mechanism introduced by airline owing to the present hard times of economic morass. Observers are however of the view that airlines may go back to their high, outrageous fares when the economy bounces back.
Competition has also contributed to the low fares. Domestic airlines airlift about eight million passengers per annum. There may be a slide in this figure by end of this year because of the slowing economy. But the number of operating airlines seems to dovetail with the existing passenger traffic; so it is very possible that any airline that hikes its fares would lose its loyal customers.
In 2012/13, shortly after the tragic Dana Air flight, many passengers shunned domestic air travels and some airlines stopped operating. The market then became very tight as existing airlines could not meet the passenger demand despite the fact that some of the passengers chose alternative ways to travel. Fares skyrocketed and the few airlines operating then milked and exploited the passengers.
But today, operating airlines seem to be stable but due to the economic downturn, it is only low fares that can attract passengers to the airports.
An official of one of the airlines said that there is equilibrium between demand and supply now but noted that if the economy continues to slide, more people would resort to alternative means of travelling to their destinations and shun air travel.
“I think there is equilibrium in the market now. The high fares of 2012 and 2013 had all gone. Airlines have to bring down fares to survive because traffic is low. But the fares are not very low as should be expected but it depends on when you buy your ticket. But in terms of service, some of the airlines have improved their service, while others have remained as they were. But what we are witnessing is a downturn which we pray should not continue,” the official said.
But a senior official of a major airline, which charges the highest fares in the domestic market, justified it by saying that cost of ticket is directly related to the exchange rate because everything about the aircraft is imported, including aviation fuel.
The official also acknowledged that the high fares have affected the volume of passengers the airline airlifts but insisted the airline cannot sell tickets below the cost of its operation.
“The relatively high cost of ticket makes sense because it reflects the value of Naira and it has affected the number of passengers but for you to determine your fares you have to compute your price by your operating cost which include the aircraft, maintenance, spare parts, fuelling etc. All these are dollar based and you sell your tickets in Naira, so you have to sell at the cost that reflects the worth of Naira to the dollar. What is the strength of Naira to the dollar?
“So any airline that is not conscious of these costs may be making mistakes because at the end of the day may not have enough funds to maintain its aircraft. It means that there is a mismatch somewhere. So cost of ticket is directly related to the exchange rate, the taxes which airlines pay to the aviation, which is constant or increasing,” the official added.
Industry operators and analysts have advised that government should help the airlines by finding a way to process aviation fuel locally. They also urged the government to review the taxes airlines pay to aviation agencies in order to make the airlines sustain their operations and make profits.
