African governments will have gleefully pulled up a chair to watch a riveting battle between Nigeria’s aviation regulator and powerful blue-eyed foreign carriers in what analysts say could trigger a new era of tighter and unpredictable regulation in the $67.8 billion regional air industry.
Nigeria accuses major international airlines plying its routes–chiefly British Airways and Virgin Atlantic– of overcharging its citizens and gave them a 30-day ultimatum, effective March 26, to redress perceived air imbalances or be barred from operating in its airspace.
Industry watchers say African airlines flying to Nigeria were unlikely to be affected by the directive that was clearly targeted at the two giants, which Abuja insists made profits by the bucketload at the expense of Nigerians, forcing some to even travel to neighbouring capitals to take advantage of lower fares to the same destinations– ironically by the same carriers.
It is a continuation of a damaging spat between Nigeria and the British Government over landing rights at Heathrow for local carrier Arik Air and which forced the young airline to last month suspend its flights from Abuja to London.
The Nigerian Government’s bid to rein in the heavy-hitters could set a precedent for more power battles between African regulators and deep-pocketed airlines, observers say.
“If it is confirmed that it is true that fares being sold in Nigeria are higher than fares sold to neighbouring countries, then other countries could begin to review their own fare structures for foreign carriers in their markets,” Mr Raphael Kuuchi, the director for Commercial and Corporate Affairs at industry grouping Afraa, told the Africa Review.
“Similar measures may be introduced, as African countries wake up to the reality that despite the fact that the lucrative traffic on their routes belong to them and their carriers, they are not proportionately benefiting,” said Mr Kuuchi.
The Nairobi, Kenya-headquartered African Airlines Association trade grouping derives its affiliation from the African Union (AU) and currently counts 29 active members.
The British Government said it would retaliate if its carriers were banned, terming the threat as potentially ” heavy-handed” and “catastrophic” for business confidence in Nigeria.
Such action would also go against a recent deal signed by British Prime Minister David Cameron and Nigerian President Goodluck Jonathan to double bilateral trade, a British High Commission spokesman in Nigeria told news agency Reuters.
“Action against BA and Virgin would damage that strategic aim,” he said.
But the Nigerian Government said it was only out to ensure that Nigerians got value for their money, given they contributed to the huge profits that the foreign carriers were raking in.
The UK Department of Transport has reportedly commissioned a study into the claims, with a Nigerian survey also underway. Their resolutions are expected in June.
BA and Virgin recently scored a significant victory when a Nigerian judicial panel knocked back a $235 million fine slapped on them in November by the Nigeria Civil Aviation Authority (NCAA) over collusion in prices.
While the NCAA says it has further referred the matter to the Ministry of Justice for further direction, analysts noted that the case was dismissed only on a technicality after the panel argued that it could not apply the law retroactively.
“With respect to NCAA’s factual allegations and finding that both airlines engaged in deception, collusion (price fixing) and unfair methods of competition, the panel found that all the allegations were sufficiently established by overwhelming evidence,” NCAA director general Dr Harold Demuren told the House of Representatives Committee on Aviation.
“It is on record that neither BA nor Virgin Atlantic have taken any additional steps to contest or refute the determination of the panel,” said Dr Demuren.
British Airways Nigeria Country Manager Kola Olayinka this week told the aviation committee that the fares were determined by market forces.
But Nigeria says while its routes provided substantial revenues and “incredible” margins to the operators, its citizens had been consistently given a raw deal.
According to the NCAA, while both carriers regularly published and filed lower fares ex-Nigeria with the regulator, such fares were never made available for sale to the passengers, with the high end fares being offered instead.
But the Nigerian Government would have a difficult time proving that BA and Virgin Atlantic did not sell the fares they filed with the regulator, given any such records to support an investigation would have to come from the airlines themselves, and in the face of the several fare classes on offer, a challenge NCAA admitted.
Sensitive that banning the British operators would lead to a transport crisis in Nigeria, the government could only go so far with its threats, a fact the carriers were acutely aware of.
The stakes were high. A new report by the Air Transport Action Group (ATAG) and Oxford Economics found that Africa’s aviation industry employed 250,000 people directly, and 6.7 million indirectly.
Passenger numbers were expected to triple by 2030 to 150.3 million from last year’s 67.7 million.
Governments would most likely tread with caution, despite the temptation to take on the foreign carriers.
In view of the multi-billion dollar revenue generated, there were unlikely to be any revolutionary fare cuts, despite the heat that the Nigerian row had generated.
“We would [only] expect radical changes if African carriers have the capacity, which they evidently do not,” said Mr Kuuchi.
“But we might see an improvement in how passengers are treated and many major foreign airlines could also open up lower fare tickets.”
Nigeria has already prepared a Passenger Bill of Rights after complaints by passengers spiralled out of control as part of a raft of planned consumer protection regulations, in a move that other countries in the region would likely replicate in their attempts at reclaiming some clout.
Whatever the outcome of the dispute, it was clear that African aviation regulators would be poring over the details while the major foreign airlines nervously looked over their shoulders.