Market News

Airfares for flights out of Nigeria are expected to drop further as the naira has extended its gains against the dollar and the Emirates Airline plans to resume operations into Nigeria.

Festus Keyamo, minister of aviation and aerospace development, announced on Monday that Emirates had concluded plans to resume flight operations to Nigeria before June.

Keyamo disclosed this on Arise TV, saying that he had received a letter from Emirates on the return of the carrier.

Stakeholders in the aviation sector have said that the strengthening of the naira and the resumption of flights by Emirates will cause ticket fares to reduce drastically.

BusinessDay had earlier reported that airfares from Nigeria to other countries have in recent times seen a significant drop, following the appreciation of naira and the competition arising from Air Peace commencement of Lagos-London route.

The pressure on the foreign exchange market has eased in recent weeks after the naira fell to record lows.

The large naira depreciation caused by the FX reforms that started last year had led to a steep rise in the International Air Transport Association (IATA) rate for ticket sales.

Last week, the IATA rate for ticket sales in Nigeria dropped from almost N1,800/$ a few months ago to N1,395/$.

The drop in the rate quickly saw the prices of tickets drop across several destinations.

A one-way ticket from Lagos to London on British Airways that was sold for N3 million (Economy Class) and N11 million (Business Class) cost N1.7 million and N6.8 million respectively.

On Lufthansa, the price of a one-way ticket from Lagos to London dropped from N3 million (Economy) and N9 million (Business) to N2 million and N7 million respectively.

On Virgin Atlantic, the price for Economy, Economy Premium and Business Class fell from N2 million, N5 million and N12 million to N1.5 million, N3 million and N6 million respectively.

Susan Akporiaye, president National Association of Nigerian Travel Agencies (NANTA), said that when the naira was as low as N1,850 to a dollar, ticket inventory available on the Lagos-London route was between N5 million to N6 million.

“The rate of exchange determines the price of tickets. Now the rate of exchange has dropped, BA and Virgin Atlantic are charging as low as N1.1 million and N1.2 million for a return ticket from Lagos to London. As the naira gains more strength, fares will continue to drop. Air Peace will also have to further reduce fares; if not, they will not be able to compete on the route,” Akporiaye said.

She said airlines also resumed promo fares because of Air Peace, adding that if Emirates resumes flights into Nigeria, tickets from Nigeria would further drop.

She said: “Promo tickets for Virgin are N900,000. Egypt Air is also doing a 15 percent discount as promo. Tickets are priced in dollars. If the rate of exchange comes down to N700 to a dollar, then fares will come to as low as N500,000.

“Emirates is the master of price war because they have the money. Emirates, despite suspending flights in Nigeria for over two years, has been paying their staff and keeping their office space. Emirates will come back and slash ticket prices to London. This is when the price war will begin. Emirates don’t depend on sales of tickets to survive.”

Kingsley Nwokoma, president of the Association of Foreign Airlines and Representatives in Nigeria, told BusinessDay that a substantial amount of trapped funds have been paid to foreign airlines and that was why foreign airlines released lower fares.

“The reason why fares went up in the first place was because low inventories were shut down. Now the government has shown enough goodwill to make payments; so it is in the interest of airlines to also show some goodwill to Nigerians by making low inventories available. To the best of my knowledge, CBN has cleared all the backlog; the only outstanding payments are the ones with the commercial banks,” Nwokoma said.

He said it was at the same time CBN cleared the trapped funds that the naira gained strength. This, according to him, made fares drop.

“Fortunately, all these happened the same time Air Peace commenced its Lagos-London flight,” he added.

He said the resumption of Emirates flights will mean more competition on international routes and this will mean more choices for passengers.

Last year, IATA disclosed that Nigeria owed $812.2 million out of $2.27 billion trapped funds, making it the country with the highest trapped funds globally.

The top five countries that accounted for 68.0 percent of blocked funds were Nigeria ($812.2 million), Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million) and Lebanon ($141.2 million).