Airfares drop as foreign carriers unblock low-priced tickets

The CBN had about two weeks ago announced the completion of payment of $7bn legacy debt, which included FX forward contracts among foreign exchange-denominated debts.

The CBN, however, declared about $2.4bn of the $7bn debt invalid, saying it could not be verified due to improper documentation among other infractions.

The International Air Transport Association, the trade body representing foreign airlines, has yet to verify the clearance of the entire $700m but findings showed on Saturday that the foreign carriers had begun to unblock their low-priced tickets.

To maximise their yields, foreign carriers had over 24 months ago blocked their low-priced tickets on Nigerian routes after ticket revenue running to hundreds of millions of dollars became trapped in Nigeria.

The development led to a sharp increase in fares on the Nigeria routes and was exacerbated by the sharp depreciation of the naira against the United States dollar, with economy fares on popular destinations such as the Lagos-London-Lagos route going for over N3m.

The CBN began the gradual clearance of the debt but the new administration of the apex bank later fast-tracked the payment, leading to clearance of major parts of the debt between late last year and so far this year.

Following the CBN announcement of the clearance of the $7bn, findings revealed that most of the airlines had released their low-priced fares.

The development was confirmed by the Chairman of the National Association of Nigerian Travel Agents, Susan Akporiaye.

She, however, revealed that virtually all the foreign carriers opened their low fares before the CBN announcement of the payment of the $7bn about two weeks ago, adding that low fares were opened about two weeks before the apex bank announcement.

Akporiaye said, “All of them (foreign airlines) have opened up all the inventories before the final backlog of forex was cleared. It is not now that it was cleared. It was cleared earlier in March.

“It is the only airline that has not done that. All of them have opened up all the inventories before the final forex backlog was cleared.

“We had a few that had issues – the unverified ones. There were some transactions for which some documents were not available. They were unverified. And those that were not cleared in February because they were unverified are those that have just been cleared.”

The NANTA chairman pointed out that one foreign airline had yet to open up its low-priced tickets, saying, “Before this final clearance, the airlines had already reduced inventories, except for one airline, which I won’t mention due to privacy, and I’m sure that the reason why they haven’t complied is a management thing.”

She emphasised that the airlines had been cooperative, but challenges such as unverified transactions caused delays.

“The money the airlines are saying that they are still owed is money with the commercial banks and not with the government, because commercial banks are private. They are not government entities,” Akporiaye added.

Findings by Sunday PUNCH showed that commercial banks were still reconciling with the foreign airlines with a view to clearing the final payment following the announcement of the clearance of the final backlog by the CBN two weeks ago.

“At times, the commercial banks are slower than the communication from the CBN. We will ask the airlines to contact their banks and we will have a clearer position. Then we will be able to respond to your inquiry based on verified data,” an IATA official told one of our correspondents on condition of anonymity because the official was not authorised to speak on the matter.

An IATA spokesperson confirmed the development, noting that the body would come with its position on the matter soon.

“IATA is engaging with its members on the situation regarding blocked funds in Nigeria,” a spokesperson for the global body in Geneva said when an update was sought following the CBN announcement.

However, findings showed that the airfares on the Nigerian route recorded a drop despite the opening of low inventories by foreign carriers.

This was confirmed by the NANTA chairman, Akporiaye.

“The release of lower inventories will not necessarily make airfares low because of the rate of exchange,” she noted.

Our correspondents discovered a notable difference in the costs of air tickets sold on March 4, 2024, compared to those on Saturday.

As of Saturday, the round-trip economy class ticket from Lagos to London varied in cost among different airlines.

RwandAir Express offered it at N1,102,563; Royal Air Maroc at N1,628,675; and Ethiopian Airlines at N1,641,249.

However, on March 4, 2024, a round-trip economy class ticket from Lagos to London attracted significantly higher prices. Air France priced it at N2,482,138, while Lufthansa offered it at N1,966,165. Qatar Airways provided the same ticket for N2,016,824, and KLM priced it at N2,448,740.

The average fare for flights on March 30 amounted to approximately N1,457,495.67, reflecting a decrease from the prices observed on March 4, which averaged approximately N2,478,466.75

This price drop represents a 41.19 per cent decrease in the cost of round-trip economy class tickets from Lagos to London.

A trip from Lagos to New York also recorded a drop in fare in the same period.

For the Lagos to New York route on Qatar Airways, the ticket was sold for N2,982,049 as of March 4. However, as of Saturday, it was sold for N1,989,098.

KLM charged N3,158,314; Air France priced it at N3,148,308; United Airlines listed it at N3,193,185, and Delta Air Lines offered the ticket for N3,310,097, on March 4, 2024.