Until that infamous tirade by the Airline Operators of Nigeria (AON), I could have sworn that the issues raised by the Federal Competition and Consumer Protection Commission (FCCPC), would ordinarily invite some soul searching on the part of the former. After all, the subject matter, having traversed in the public sphere for so long isn’t exactly the kind that anyone – excepting the AON – could pass off as idle stuff. They are live issues – so to speak – over which Nigerians have endured only because they have nary a choice. Never could one have imagined the ill-tempered, not to talk of inscrutable arrogance, targeted at the lead consumer protection agency by a bunch of operators only because the former had the nerve to call them out over unfair trade practices.
Guess Nigerians know the story already. Thursday, February 26, the FCCPC formally released the interim report on its investigation of price fixing by local airlines during the last yuletide. As one might imagine, the report merely confirmed what is already an open secret: “Preliminary analysis indicates that fares recorded during the December peak were materially higher than those observed in the post-peak period across several routes despite relative stability in critical operating variables like fuel price, government taxes and foreign exchange”.
It noted for effect: “The differences observed in fares therefore appear to reflect airlines’ arbitrary pricing decisions, including yield management and capacity allocation, rather than any variation in regulatory fees.
“Route-level analysis shows that higher fares coincided with periods of reduced seat availability during predictable seasonal demand peaks. On some high density routes, peak fares were clustered within relatively narrow ranges across several operators.
“For instance, on certain corridors like Abuja-Port Harcourt, peak fares were several times higher than corresponding post-peak levels. On selected routes, the difference in the price of a single ticket reached approximately N405,000. Median fares across the sampled routes also rose markedly during the festive window when compared with post-peak benchmarks”, it further observed.
More crucially, the report acknowledges “that seasonal demand pressures, scheduling constraints and fleet utilisation may also affect pricing during peak travel periods”, even as it says that “these factors remain under consideration as part of the commission’s ongoing review”.
However, much as it seems the FCCPC had reasons to hint at potential breaches to various sections of the FCCPC Act 2018, particularly on such issues as the prohibition of agreements in restraint of competition, the prohibition of abuse of a dominant position, the offence of price-fixing, conspiracy to commit offences under the Act, the right to fair dealings, and the prohibition of unfair, unreasonable or unjust contract terms, the commission’s executive chairman, Tunji Bello, was nonetheless unequivocal about the interim nature of the report: “It is important to emphasise that this is an interim report. Our next action will be dictated by full facts established at the end of the review exercise. Then, the commission will decide whether any regulatory guidance, engagement or enforcement steps are necessary, strictly in accordance with the law,” he said.
I thought that was fair enough.
Nonetheless, it was the moment for the airline cartel to raise hell. AON spokesperson Obiora Okonkwo was effusive: FCCPC was interfering in matters outside its professional competence. The commission, he says, “does not understand the complexities of airline operations or pricing structures”. He didn’t forget to throw in the old but familiar weapon of blackmail: the regulator’s actions are “very detrimental to the survival of domestic operators”.
I understand why the latter argument, by now familiar, has since become the gold standard, a shield of sorts, for excusing not just corporate bad behaviour by the players, but their weird business practices now served as Nigeria’s way of doing business. Talk of Nigeria’s famed anyhow-ness which the rest of the world now treats with unsurpassable contempt. It is precisely the reason why the airline spokesman’s defence has been laughable were it not to be so tragic.
To start with, no one, certainly not the FCCPC, needed to be schooled in the complexities of airline operations to see through the patently false argument presented by those who consider themselves as above regulation as one of intrusion into their internal dynamics of price determination. Indeed, the FCCPC need not understand “the complexities of airline operations or pricing structures” to get its job of keeping market abusers to behave responsibly. In any case, the commission, as the public already knows, did not just come up with preliminary findings without proper investigation.
Surely, the FCCPC has long made the argument – and many, including yours truly, have long been persuaded of this – that price fixing in whatever shape and guises and by whatever description is not its remit. But then, the same cannot be said of those activities by actors which not only undermine the fundamental rules of fair play in the economy, but such other anti-competition practices which seek to put the ordinary consumer to the sword, and one which the airlines have become rather notorious.
The main issue, and which the airline operators did not bother to deny, is that its members were engaged in the predatory practice that is best described as price gouging. It is after all, incontrovertible that airline ticket prices, which during the year usually ranged between N145,000 and N150,000, suddenly shot up to between N400,000 and N670,000 during the last yuletide.
Even if we accept the fact of the yuletide season as ‘peak season’ and the other explanation of ‘capacity issues’ as underlying the fare increases, it seems unimaginable that an industry-wide, across the board 200 percent hike in fares would pass without stoking concerns about collusion, unfair dealings and other anti-free market practices, particularly when other known parameters are unchanged.
Even more unimaginable is that the country’s lead consumer protection agency could be expected to ignore the complaints when its attention was brought to it. I think the problem here is that the airline operators, having been conditioned to doing things anyhow, believe that those charged with the business of regulation will look the other way. Well, they are wrong – as they are now finding out.
This takes us to the final point: the ludicrous charge that the FCCPC’s actions are “very detrimental to the survival of domestic operators”. To be sure, this is hardly a new one. It was the line deployed when a leading airline, Air Peace, was similarly called out for price manipulation by the FCCPC. Then, it was the Minister for Aviation and Aerospace Development, Festus Keyamo, making the case about bad corporate practices being tolerable because the airlines were having a bad patch. Now, the wheels have turned full cycle. This time around however, I believe that Nigerians can relax in the knowledge that FCCPC exists to call out indulgent service providers. Yes, it should let the hammer fall…
