Airfares Drop as Foreign Carriers Unblock Low-Priced Tickets

Foreign airlines operating in Nigeria have commenced unblocking their low-priced fares on Nigerian routes following the Central Bank of Nigeria’s (CBN) completion of the payment of a $7 billion backlog. This backlog includes over $700 million in unremitted ticket revenue. The CBN recently announced the completion of payments, which encompassed FX forward contracts among other foreign exchange-denominated debts.

Approximately $2.4 billion of the $7 billion debt was declared invalid by the CBN due to various reasons, including improper documentation and other infractions. Despite the International Air Transport Association (IATA) yet to fully verify the clearance of the entire $700 million, findings indicate that foreign carriers have begun unblocking their low-priced tickets.

Foreign airlines had restricted their low-priced tickets on Nigerian routes over two years ago after significant ticket revenue became trapped in Nigeria, resulting in elevated fares. The depreciation of the naira against the United States dollar further exacerbated this situation, with economy fares on popular routes, such as Lagos-London, exceeding N3 million.

The gradual clearance of the debt by the CBN, accelerated by the new administration of the apex bank, has led to the release of major portions of the debt between late last year and the present year. Following the CBN’s announcement of the clearance of the $7 billion debt, most airlines have released their low-priced fares.

Susan Akporiaye, Chairman of the National Association of Nigerian Travel Agents (NANTA), confirmed that virtually all foreign carriers had opened their low fares even before the final backlog of forex was cleared. However, one airline has yet to comply, citing internal management issues.

Commercial banks are still reconciling with foreign airlines to finalize the remaining payments following the CBN’s announcement. Despite the release of low inventories by foreign carriers, airfares on Nigerian routes have witnessed a drop. This reduction in fares was confirmed by Akporiaye, who noted that the exchange rate still affects the final ticket cost.

In comparison to prices on March 4, 2024, round-trip economy class tickets from Lagos to London now vary among different airlines, with a notable decrease in costs. Similarly, fares for the Lagos to New York route have also decreased within the same period.

While some travel agents acknowledge the release of cheaper fares, they highlight that taxes attached to these fares often inflate the final cost for travelers. The Federal Government had earlier issued warnings to foreign airlines regarding low inventory ticket releases, threatening sanctions for non-compliance. Airlines pledged to enhance transparency, with sanctions pending for those failing to comply.

The recent disbursement of part of the $700 million trapped air ticket funds to foreign airlines signals ongoing efforts by the government to address challenges in the aviation industry.