In 2022, the Federal Government’s inability to allow foreign airlines operating in the country’s airspace to repatriate their funds forced them to suspend their operations in Nigeria.
Following complaints of trapped funds, the United Arab Emirates, UAE, flag carrier, Emirates airlines, disclosed that effective from September 1, 2022, it would suspend operation in Nigeria’s airspace.
Regrettably, there was no progress. Therefore, Emirates took the difficult decision to suspend all flights to and from Nigeria, effective September 1 2022, to limit further losses and impact on its operational costs that continue to accumulate in the market back then.
But now, Emirates and other airline are prepared to start coming back. It may be before the summer. They will announce the date, as airfares for flights out of Nigeria are expected to drop further after the naira has extended its gains against the dollar.
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.
We 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).