Exclusive: Irukera seeks probe into foreign airlines ‘predatory pricing’ against Air Peace

THE immediate past Director-General of the Federal Competition and Consumer Protection Commission (FCCPC), Babatunde Irukera, has said that the ‘predatory pricing’ allegation by foreign airlines against Air Peace threatened the airline’s access to the global aviation market with its commencement of the Lagos-London route.

Irukera, who spoke exclusively with The ICIR on Thursday, April 11, said there was nothing wrong with a ‘price war’, but allegations of ‘predatory pricing’ by the chairman of Air Peace, Allen Onyema, could not be swept under the carpet and must be investigated.

Investopedia describes “predatory pricing” as the illegal business practice of setting prices for a product unrealistically low to eliminate the competition. Predatory pricing violates antitrust laws, aiming to create a monopoly.

Air Peace commenced its flight operations from Nigeria to London on March 30, with Gatwick Airport as its designated destination.

The airline slashed the hitherto economy class from an average of N3.5 million from Lagos to London to about N1.2 million, a reduction of approximately 66 per cent.

There were concerns that other deep-pocket international competitors would have to lower their prices below cost due to its arrival in the global aviation market.

“The Nigeria Civil Aviation Authority (NCAA) and FCCPC should urgently investigate ‘predatory pricing’ concerns raised by the management of Airpeace Airline with some International Airlines,” Irukera said.

“When you go below market price, knowing that any competitor who doesn’t have the financial muscle or market share than you will not survive is called ‘predatory pricing’. In most cases, those competitors die off, and the other competitor comes in to muscle the market. Air Peace is alleging that that is what is happening. It’s not a mere allegation and needs complex investigations to confirm that,” Irukera added.


He urged all relevant government agencies to examine all the issues and service provisions so Air Peace wouldn’t be pushed out of the market.

According to Irukera, the FCCPC, in alliance with the NCAA, should invoke the provisions of section 112 of the FCCP Act, which prohibits excessive or manifestly unjust and unreasonable pricing.

“The investigation should look at, let’s say, the Heathrow and Gatwick markets, the equipment they are flying, cost of maintenance, ground landing costs, average load, cost spendings, payroll costs of Virgin, British Airways, and other competitors to determine averagely what price should be to ascertain who is flouting the law,” he further stated.

Notably, the global civil aviation market size was worth around $842.71 billion in 2022 and is predicted to grow to around $1.631 trillion by 2030 with a compound annual growth rate (CAGR) of roughly 8.62 per cent between 2023 and 2030.

Findings by The ICIR showed that foreign airlines have started crashing their airline ticket prices below those of Air Peace for the Lagos—London route.

Analysts observed that the emergence of Air Peace on that route had threatened the profit margins of these foreign airlines.

“It is likely that as a result of this, they would try to frustrate Air Peace and take them out of business. This will be easy for them to do because they have the cash reserve they need to start a “price war”, “an economic analyst, Stanley Umezilike, said.

“Their goal, perhaps, is to reduce the price to the barest minimum and increase it 20 times over the moment they succeed in crippling Air Peace. Some of these foreign airlines were charging ₦15 million to ₦17 million for business class for the Lagos- London route.

Further findings revealed that Air Peace reduced the price to four million naira for business class and started charging ₦1.2 million for economy class.

However, some of them are now selling their economy tickets for as low as ₦700,000.

A former senator from Kaduna State, Shehu Sani, also shared a similar concern and explained that foreign airlines were crashing their prices because of Air Peace.

naptu2:
People have been making all kinds of arguments about this price war in the aviation industry, but the matter is simple and straightforward. It's an issue for the Competitions Commission.

The question is whether the new fares by airlines are below cost price. If they are below cost price then the Competitions Commission should stop them for engaging in anti-competitive practices (that is, trying to run a competitor out of the market [and therefore reduce the choice of consumers] by charging fares that are below cost price).

However, if the fares are above cost price, then the airlines can carry on.

naptu2:

People have been making all kinds of arguments about this price war in the aviation industry, but the matter is simple and straightforward. It's an issue for the Competitions Commission.

The question is whether the new fares by airlines are below cost price. If they are below cost price then the Competitions Commission should stop them for engaging in anti-competitive practices (that is, trying to run a competitor out of the market [and therefore reduce the choice of consumers] by charging fares that are below cost price).

However, if the fares are above cost price, then the airlines can carry on.

naptu2:


These are basic things that I learnt in 1985/86. Standard Oil, Bell Corporation, anti-trust laws, monopolies, undercutting. There's even Microsoft (internet explorer and windows media player) in the 2000s!

Someone thinks it's ok to charge below cost price to eliminate competition and reduce choice.

JASONjnr:


Probing the fare price is welcome idea....

But saying if the fares are below cost price, then they should stop is not intelligent at all....

This is what they should've looked into long ago, but because of corruption, they allow these people to hike the prices and be giving them kickbacks while Nigerians travelling pays through their teeth.

Air peace made it clear, they will render him useless and out of business, then they will increase it back, even more than it used to be.

naptu2:


For some reason this guy has developed a habit of quoting me and posting absolute nonsense. He doesn't know what predatory pricing is and he doesn't even know the job of the competitions commission. He hasn't go a clue!

What kind of crap is this??

DesChyko:
This should be easy to prove?

Cost of operation for such flights plus possible profit margin, then less the average revenue to see if it's sustenable pricing in the long run.

Either ways, it will still carry a tinge of protecting national interests.