CEM REPORT, AVIATION | The skies above the lucrative Lagos-London route have become a battleground for airfare prices. Since Air Peace, Nigeria’s leading airline, launched direct flights on March 30, 2024, foreign airlines have been engaged in a price war, slashing ticket costs by as much as 70% in some cases.
This dramatic shift comes after a period of high airfares for Nigerian travelers. For over a year, the depreciation of the naira against the dollar led to a rise in the International Air Transport Association (IATA) rate, a benchmark for ticket sales. This pushed ticket prices to staggering heights, with some airlines charging as much as ₦17 million for business class and ₦5 million for economy on the Lagos-London route.
However, the tide began to turn with Air Peace’s entry. The airline’s competitively priced tickets, starting at ₦1.2 million for economy and ₦4 million for business class, sent shockwaves through the market. Notably, their maiden flight to London was fully booked, demonstrating the pent-up demand for affordable travel options.
Airline stakeholders are divided on the primary driver behind the price war. Air Peace, led by CEO Allen Onyema, maintains that foreign airlines are deliberately slashing fares below their break-even point to drive them out of the market. They point to the lack of significant change in the exchange rate as evidence of a strategic price manipulation.
“The foreign airlines were taking between ₦15-₦17 million for business class… Then Air Peace came on, charging ₦4 million for business class… Now Air Peace did this, everybody has come crashing their prices from ₦418 million to ₦5 million. Dollar did not change,” Onyema stated in a recent interview.
In response, the BA quickly slashed its one way economy class ticket from Lagos to London from ₦3 million to ₦1.7 million and Business Class ticket from ₦11 million to ₦6.8 million.
On Lufthansa, a one way economy class ticket from Lagos to London which also cost about ₦3 million and ₦9 million for Business class was slashed to ₦2 million for economy class and ₦6.5million for Business Class.
On Virgin Atlantic, the same destination which cost about ₦2 million for Economy, ₦5 million for Economy Premium and ₦12 million for Business Class was slashed to ₦1.5 million for Economy, ₦3 million for Premium and ₦6 million for Business Class.
Onyema fears that if foreign airlines succeed in pushing Air Peace out, Nigerians will be subjected to a return of exorbitant fares.
However, other stakeholders offer a different perspective. They argue that the price reduction is a result of a confluence of factors, including the recent appreciation of the naira and the repatriation of trapped funds held by foreign airlines. The argument goes that with the naira regaining strength and airlines receiving outstanding payments, they have more flexibility to offer lower fares.
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Bankole Bernard, a travel and tourism expert, supports this view. He highlights the coincidence between the naira’s appreciation and the timing of the fare reduction. He also points out that foreign airlines have historically enjoyed high profitability on Nigerian routes, suggesting they can afford to lower prices temporarily.
The Impact on Lagos-London Route Travelers
Regardless of the cause, Nigerian travelers are the clear winners in the short term. They now have access to significantly cheaper fares on the Lagos-London route, with both Air Peace and established airlines offering competitive prices.
The Future of the Price War
The sustainability of the current price war remains to be seen. If Air Peace maintains its market share and foreign airlines continue to operate at a loss, the situation could escalate. However, if the naira strengthens further and trapped funds continue to be repatriated, foreign airlines may have more room to maneuver.
One thing is certain: the Lagos-London route has become a battleground for airfare, and Nigerian travelers are the clear beneficiaries. As the competition intensifies, it will be interesting to see how airlines strategize to maintain their foothold in this lucrative market.
