FG begins probe of airlines over alleged collusion to fix airfares

The Federal Government has commenced investigations into the alleged collusion by domestic airlines to fix airfares on all domestic routes.

Price-fixing is a practice whereby rival companies come to an illicit agreement not to sell goods or services below a certain price.

It was gathered on Tuesday that efforts were currently ongoing to unravel reasons for the sudden hike in airfares by all domestic carriers, as the airlines, aside from  Green Africa Airways, raised the airfare for a one-hour flight in economy class to as high as N50,000.

This indicated a jump of over 60 per cent, considering the fact that airfares for such tickets were between N26,000 and N30,000 few weeks ago.

An email sighted on Tuesday, which was allegedly sent by a domestic carrier to its travel agents, stated that all airlines had effected same increase in airfares.

Industry observers argued that the email and other indications suggested that the airfare hike was an unanimous decision by domestic carriers to engage in price-fixing.

The email read in part, “This is to update you that effective today, February 18, 2022, the airline’s ticket fares have been reviewed with the least fare at N50.000 only across all our routes.

“This has become necessary in view of the current hike in prices of aviation related materials, services, and exchange rate.

“It is worth noting that all other airlines have also effected same fare increase. We crave your understanding and support to sell our stated fares.”

Reacting to the development, the Executive Vice-Chairman/Chief Executive Officer of the Federal Competition and Consumer Protection Commission, Babatunde Irukera, said the FCCPC was aware of the latest concern in the aviation sector.

He told our correspondent that the commission had commenced investigations into the issues raised by both passengers and other concerned observers in the aviation sector.

He said, “We’ve been engaging the Nigerian Civil Aviation Authority on that. Firstly, it is against the law for competitors to coordinate and come together to discuss or agree on price. That is forming a cartel.

“But an announcement in itself will not be sufficient evidence of the cartel. You need to investigate and discover if there is such cartel. Now the articles we’ve read seem to suggest that they agreed as an airline association. But we haven’t seen an evidence of that.

“And because cartel is criminal and will involve monetary penalties, it requires evidence to clear every doubt. So we need to find the evidence if that’s what happened, for instance, one airline has said to us, ‘no, we were never part of any announcement’.”

Irukera added, “They said others increased airfares and they saw an opportunity to increase their own, which was part of market forces. So it is now for us to gather the evidence to narrow it down to a violation of law, to at least show that it was a coordinated conduct.”

The agency’s boss stated that the commission would issue a public statement on the development soon, adding that the FCCPC was currently “gathering evidence to see at what point in their systems did the airlines changed their fares.”

Irukera said, “This is to see if there was any coordination or if was a response to what another airline did or not. So the short answer to this is that any coordinated conduct or agreement with respect to price among competitors is a violation of law and the FCCPC strongly rejects that and will pursue it.

“However, in this case we are gathering information at this point to find the evidence or the lack thereof.”

Asked to react to the alleged email of a carrier to its agents, Irukera replied, “This is similar to what we have seen in other places. It actually doesn’t provide evidence of a conspiracy.

“However that all airlines seem to have adopted N50,000 is curious and evidence requiring further interrogation which is what we are doing.”

Findings on Tuesday showed that airlines had implemented the hike, as Air Peace and Ibom Air’s one-way flights for February 23, 2022 from Abuja to Lagos, for instance, were all marked N50,000, in contrast to rates within N26,000 to N35,000 some weeks ago.

It was observed that domestic carriers including Air Peace, Arik Air, AZMAN Air and United Nigeria Airways had all fixed their minimum economy class tickets for a one-hour flight at N50,000.

Others that fixed the same minimum rate for economy class tickets on an hour flight include Max Air, Aero Contractors and DANA Air.

It was, however, observed that only Green Africa Airways had a rate below N50,000 for an economy class ticket for same duration. Green Africa Airways is said to be operating the model of a budget carrier, hence, its decision to keep its fares relatively lower.

The local airlines had recently stated the fluctuations in exchange rate, hike in aviation fuel price, which increased from N190/litre to N400/litre between 2021 and 2022, would cause an increase in airfares.

The airlines had also decried the difficulty they faced when trying to access foreign exchange at the official window, hence many domestic carriers had resorted to sourcing the United States dollars at the parallel market at rates above N550/$.

When contacted on whether the NCAA would intervene in the current hike in airfares, the spokesperson of the authority, Sam Adurogboye, replied, “Airfares have been deregulated and as such is governed by market forces and not by the NCAA.”

Article first published on the Punch Website