The Federal Competition and Consumer Protection Commission (FCCPC) is deeply troubled by the worsening plight of the nation’s air travelers. Air fares went up by 100 per cent last week and no one knows precisely who ordered the fare hike.
The airlines claim that the hike was a unilateral action by individual airlines but FCCPC is convinced that the hike was the product of a grand conspiracy by the airlines.
FCCPC claims that a conspiracy by the airlines to hike fares was a criminal offence. The problem is that no one in the airline industry agrees that there was a meeting of operators that reached the decision to hike air fares by 100 per cent.
The only thing that is indubitable is that a one-hour flight within Nigeria now cost a princely sum of N50, 000. About 10 days ago, a similar flight cost just N25,000. FCCPC is seemingly at war of words with the Nigerian Civil Aviation Authority (NCAA), the regulator of the civil aviation industry.
While FCCPC sees the fare hike as a criminal act by the airlines, the regulator of the industry believes that air fares are deregulated. Consequently, the airlines have the right to charge what is enough to cover the cost of their operations and leave a sensible profit margin.
From the point of view of NCAA, FCCPC though fighting the course of air travelers, may be chasing shadows. Many economy watchers, especially those in the school of thought that believes in the fixing of prices through a grand conspiracy between the invisible hands of the forces of demand and supply, cling tenaciously to the postulation of NCAA which advocates the right of the airlines to determine fares based on their cost of operations.
Some air travelers totally condemn the hike. They urge the federal government to intervene and protect consumers of airlines services. Ironically, the federal government appears to be speaking from both sides of the mouth.
FCCPC, an agency of government charged with the responsibility of protecting consumers, is angling for any evidence of conspiracy by the airlines in the fare hike that would give it the grounds to prosecute the operators with the hope of reversing the hike.
NCAA, the industry regulator, seemingly has its hands tied to the back as its responsibility is more about the airworthiness of the aircraft in the fleet of the airlines and less of consumer protection.
That explains why NCAA clings tenaciously to the claim of fare deregulation which allows the airlines to charge whatever is dictated by interplay of the forces of demand and supply.
The federal government knows precisely who of its two agencies with contradictory functions is doing the right thing. If the blame for the fare hike is to be shared impartially, government would take 90 per cent of it.
The recent fare hike is long over-due. It is dictated by two key factors which the federal government failed to stem. The first factor is the massive depreciation of the naira since 2015. The federal government has failed calamitously to firm up the naira. Airlines spend foreign exchange on practically everything they do.
The cost of a one-hour flight in the international community is $100. In 2013 when the naira traded at N160 to the dollar, that amount translated to a scant N16, 000. Today with the naira at N570 to the dollar, $100 is N57, 000.
In other words, the airlines are not charging the international cost of a one-hour flight even with the 100 per cent fare hike.
A one-hour flight should be N57, 000. The airlines are convinced that they would be pricing themselves out of the market if they raise fares to that level in one-fell swoop.
The next cause of the seemingly unacceptable fare hike is Nigeria’s incorrigible dependence on imported refined petroleum products.
Nigeria, a leading member of the Organisation of Petroleum Exporting Countries (OPEC), had in the last 30 years battled intermittent fuel shortages and atrociously high landing cost of imported refined petroleum products largely because of the depreciating value of the naira. When the naira traded at N160 to the dollar in 2013 with crude oil at $105 per barrel, the landing cost of petrol was less than half of what it is today.
Currently, a litre of aviation fuel should not be more than N350. However, it has risen to N411 because of the middlemen factor. The high cost of imported aviation fuel and other refined petroleum products is largely dictated by the depreciating value of the naira.
Now Russia, a country run by a ruthless tyrant, has added more reasons for the high cost of aviation fuel and other refined petroleum products. Russia’s invasion of Ukraine last week leisurely pushed crude oil price to $105 per barrel in the opening hours of the invasion.
If the price of crude oil remains at that level or rises above that if Russian crude oil is schemed out of the market by western sanctions, then the pump price of a litre of imported aviation fuel might sail perilously close to N500. At that level the airlines would have no option than to push the cost of a one-hour flight above N60, 000.
The federal government is squarely responsible for the high cost of aviation fuel and the inflation level in the economy which dictates the recent hike in air fares. The pump price of refined petroleum products would drop drastically the day Nigeria produces what it consumes.
In the absence of that feat, the airlines would just be praying that nothing pushes air fares above current levels because that would be calamitous for their patronage.
Federal government’s tenacious cling to ownership of Nigeria’s incapacitated 24 airports is another disincentive for air travel which forces a catastrophic economy of scale on the airlines.
The airlines are spreading their atrociously high cost of operations on a precipitously declining passenger turnout. The airports are too primitive to attract the number of passengers that would make the airlines operate profitably. Consequently, the civil aviation industry is crippled by symbiotic poverty that starves the airports of sufficient revenue from impoverished airlines.
The federal government can tackle the rising air fares from two angles. It should privatise the airports and allow them to be operated by firms with the financial muscles to develop them into viable tourism centres.
Besides, it should remove its meddlesome leprous hands from the downstream of the oil industry and allow capable hands to own and operate refineries. That is the only way to end Nigeria’s shameful dependence on imported refined petroleum products.
