…amid allegations of anti-competitive practices
The Federal Government of Nigeria, through the Ministry of Aviation and Aerospace Development, may soon invite some foreign airlines operating into the country from the United Kingdom for consultations if it finds that claims of anti-competitive practices levelled against them are verifiable.
The consultations may be further extended to the UK Civil Aviation Authority for remediation, in line with International Civil Aviation Authority (ICAO) rules, and then escalated to ICAO itself, if found necessary.
This follows aviation industry price wars kicked off by Air Peace, a private indigenous Nigerian airline, which launched operations into the UK on March 30 this year (2024).
By this launch, Air Peace led the way for Nigerian airlines to reciprocate the lopsided Bilateral Air Service Agreement (BASA) between Nigeria and the United Kingdom.
The local airline began direct flight operations from Lagos to Gatwick Airport in London.
It is widely believed that foreign airlines operating the Nigeria-UK and some other international routes have been charging much higher than standard market prices, taking advantage of the lack of local competition.
The price of an international flight ticket on the Lagos-London route was as high as N3.5m but with Air Peace pegging a return economy class ticket at N1.2m, foreign airlines such as British Airways, Virgin Atlantic, and Qatar Airways were forced to slash their prices to stay competitive.
It is said that some of the airlines then completely knocked the bottom off the pricing bucket, by further slashing prices to levels lower than their cost of operations, a practice considered as unrealistic, unwholesome and anti-competitive.
Allen Onyema, Chairman of Air Peace, then raised an alarm that foreign carriers operating the Nigeria-UK route were conspiring to send Air Peace out of international operations by crashing airfares on the route.
There is an “unspoken alliance” among foreign airlines to use lower pricing to eject Air Peace from the Nigeria-London route, alleged a visibly displeased Onyema on Channels Television’s Politics Today programme on Tuesday.
“If they take out Air Peace prematurely, this country will pay dearly for it ten times over, billions will be lost, there will be another heavy strain on the naira,” he said.
Onyema further said that foreign airlines operating the route “are fighting back”.We are being deliberately frustrated in all ways,” he said, citing groundhandling and space allocation difficulties at Gatwick Airport in the last couple of days.
“It’s a very devilish conspiracy,” said a dissatisfied Onyema. “All of a sudden, (foreign) airlines are underpricing, below the cost, it’s not up to one month, an airline was advertising $100, another one $305, $350. Fill up the entire aircraft and carry people on the wings, it’s not even enough to buy your fuel. So, why are they doing that? Their governments are supporting them because Nigeria has been a cash cow for everybody.
“Their governments are supporting them to do this and take Air Peace out. The idea is to take Air Peace out and the moment they succeed in taking Air Peace out, Nigerians will pay 20 times over again.”
The International Civil Aviation Authority (ICAO) which regulates global aviation business, states in a document that as, “Part of its policies and guidance on competition, ICAO has examined the issue of anti-competitive practices in international air transport. As reflected in the Conclusions of the Worldwide Air Transport Conference (ATConf/5), Montreal, 24-28 March 2003, while general competition laws may be an effective tool in many cases, given the differences in competition regimes, the differing stages of liberalisation among States and the distinct regulatory framework for international air transport, there may be a need for aviation-specific safeguards to prevent and eliminate unfair competition in international air transport.”
ICAO adds that: “This may be done by means of an agreed set of anti-competitive practices which can be used, and if necessary modified or added to, by States as indications to trigger necessary regulatory action.”
The Conference further agreed that States should give consideration to the following model clause as an option for use at their discretion in air services agreements:
“Safeguards against anti-competitive practices
1. The Parties agree that the following airline practices may be regarded as possible unfair competitive practices which may merit closer examination:
a) charging fares and rates on routes at levels which are, in the aggregate, insufficient to cover the costs of providing the services to which they relate;
b) the addition of excessive capacity or frequency of service;
c) the practices in question are sustained rather than temporary;
d) the practices in question have a serious negative economic effect on, or cause significant damage to, another airline;
e) the practices in question reflect an apparent intent or have the probable effect, of crippling, excluding or driving another airline from the market; and
f) behaviour indicating an abuse of dominant position on the route.
2. If the aeronautical authorities of one Party consider that an operation or operations intended or conducted by the designated airline of the other Party may constitute unfair competitive behaviour in accordance with the indicators listed in paragraph 1, they may request consultation…with a view to resolving the problem. Any such request shall be accompanied by notice of the reasons for the request, and the consultation shall begin within 15 days of the request.
3. If the Parties fail to reach a resolution of the problem through consultations, either Party may invoke the dispute resolution mechanism… to resolve the dispute.”
This model clause has been made part of the ICAO Template Air Services Agreements (TASA), Appendix 1. to ICAO Doc 9587 Policy and Guidance Material on the Economic Regulation of International Air Transport.
ICAO further states that the purpose of these rules and recommendations is “to preserve consumer welfare and ensure fair competition”.
Informed sources say that Nigeria’s Federal Ministry of Aviation and Aerospace, under the supervision of the minister, Mr. Festus Keyamo, (SAN), is investigating claims of the recent second level price cuts by foreign airlines on the Lagos-London route and will call the airlines for consultations if it finds their price cuts questionable.
