Commission probes air fares hike by domestic airlines

The Federal Competition and Consumer Protection Commission (FCCPC) has said the Commission has commenced an investigation to unravel the circumstances surrounding the “coordinated” hike in air fares by some domestic airline operators in the country.

Many Nigerians, who decried the hike in the air fares, had called for the intervention of the FCCPC to reduce the sudden hike by domestic carriers in the country.

However, the Executive Vice Chairman/Chief Executive of the FCCPC, Babatunde Irukera, has said that the Commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation into the coordinated conduct resulting in setting air fares by domestic airlines.

Irukera stated that although the investigation was at early stages, there was sufficient probable cause to proceed and also provide interim measures to restore a free and undistorted domestic aviation market.

He made this known in a statement made available to The Star on Wednesday.

The FCCPC Vice Chairman, who noted that the sudden hike by all the domestic carriers was coordinated, said the domestic airlines purportedly under the aegis of the Airline Operators of Nigeria (AON) proceeded to increase their fares to a minimum of N50,000 across all sectors after a series of meetings over a period of three weeks.

Irukera added that the Federal Competition and Consumer Protection Act prohibits domestic airlines from fixing prices, noting that the coordination in increasing prices, otherwise known as cartel, was an unambiguous infringement of the FCCPA.

He stated that the Nigerian Civil Aviation Regulations prohibit airlines from engaging in any contract, arrangement, understanding, conspiracy, or combination in restraint of competition which includes directly or indirectly fixing a fare or tariff.

He said “The FCCPA, Civil Aviation Act and implementing regulations of both legislations respect the right and prerogative of airlines (as other businesses) to set their fares independently subject to, and in accordance with prevailing law and applicable processes.

“However, prevailing law expressly prohibits coordination, agreement, or cooperation between competitors in setting fares. As such, the Commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation with respect to this subject.

“Although the investigation is at early stages, there is sufficient probable cause to proceed and also provide interim measures to restore a free and undistorted domestic aviation market.”

Irukera added: “On Sunday, February 20, 2022, the Federal Competition and Consumer Protection Commission (Commission) became aware that domestic airlines purportedly under the aegis of the Airline Operators of Nigeria (AON) (a trade association for domestic airlines under the Federal Competition and Consumer Protection Act, 2018 (FCCPA)) after a series of meetings over a period of three weeks including on Thursday, February 17, 2022 and Saturday, February 19, 2022 in supposedly association meetings discussed multiple industry-wide issues; particularly challenges experienced by AON members. Some subjects of the discussions included foreign exchange, cost of ground handling services, rising cost of jet fuel and air fares.

“The Commission’s preliminary investigation discloses the meeting dates of AON to have been on or about February 8, February 17 and February 23, 2022. The investigation also confirms that one of the items of discussion during at least one of those meetings was to set base or minimum air fares.

“The Commission’s understanding from intelligence so far gathered is that there was significant controversy and or an initial lack of consensus with respect to coordinated conduct resulting in setting air fares. The Commission also has credible information that while attendees at the meeting may not have arrived at a consensus, the meeting ended in a resolution that encouraged, permitted or consented to the coordinated conduct.

“The Commission’s understanding from the deliberations at the meeting is that the attendees engaged in mutual discussions and exchange of their respective revenue management models or other commercially sensitive information.

“In furtherance of the discussions and or resolution at the meeting, certain champions of the coordinated conduct of imposing a base fare or a Minimum Re-Sale Price (MRSP) for their services in a coordinated and contemporaneous manner proceeded to increase their fares to a minimum of N50,000 across all sectors.

“Specifically, Air Peace, Azman Air and United Nigeria Airlines immediately proceeded with the increase. Arik followed. However, on Friday, February 18, 2022 at 6:31 p.m. Aero Contractors informed its trade partners (travel agents) and its commercial executive team by email that ticket fares were reviewed effective February 18, 2022 with the least fare being N50,000 across all routes. Aero Contractors noted in this communication that all other airlines have effected same increase.

“Within days, Max Air also increased fares to the same minimum N50,000. Ibom Air and Dana approximately 48 hours after what appears to be the initial coordinated conduct, also increased fares although not to the purported N50,000 minimum.

“Green Africa Airlines maintained its existing fares between N33,000 and N38,650 but has progressively increased its fares rising to approximately N47,000 on its Lagos-Abuja route on Wednesday, February 23, 2022.”

Irukera, therefore, enjoined the domestic airline operators to “ensure strict and prompt compliance with the Interim Order pending outcome of the Commission’s investigation”.

The Star

Segun Ojo