New Telegraph

December 8, 2023

The economics of code-sharing agreements for Nigerian airlines

Over the last decades, the airline industry has changed to a more competitive market as an effect of the deregulation in Nigeria. In other climes, alliances have emerged and grown and created deeper incitement for cooperative behaviour between airlines. Whereas in Nigeria, the country’s airlines are yet to tap into this big market opportunity, writes WOLE SHADARE

Competitive industry

The airline industry is one of the most competitive industries in the entire world. A large number of incumbents in this industry are making losses. This is primarily because of their lack of efficiency. Since success in the airline industry is solely based on efficiency, many companies have explored unconventional options in order to increase their profitability. One such option is a code-sharing agreement between airlines. A code-sharing arrangement, therefore, refers to a situation when an airline is sharing its code with another. In simpler words, this means that if United Airlines shares its code UA with Emirates for example, then such an arrangement will be called code sharing. The flight will actually be operated by Emirates. However, for marketing and sales purposes, the flight will be addressed with the prefix UA.

Peep into Nigerian airlines

For the Nigerian aviation industry, the collaboration that could ensure stability of the carriers are lacking as experts in the aviation sector see code-share pacts among airlines as panacea to the trouble of connectivity, low capacity and serious flight delay currently experienced in the country’s aviation industry.

Nigerian airlines are local champions and not playing in the big league. They are not showing seriousness. The world is a global village; Nigerian airlines do not have attractive network. While Air France interlined with defunct Bellview and Aero two decades ago, domestic airlines have shied away from it, as a result of many bottlenecks and challenges associated with the set up that experts believe are surmountable. Air France at the peak of Aero Contractors’ operations had a good partnership where all its passengers from all over the world connected domestic flights with the Nigerian carrier to any route in the country it operated to.

The two airlines sold each other’s tickets through an arrangement that benefitted both parties. The French national carrier before then also had the same arrangement with defunct Bellview Airlines and it was an instant success. The inability to replicate that success among Nigerian airlines on the domestic market was what naysayers said could not work partly because of the desire by airlines to want to go it alone or the fact that many of the carriers are set up not to last but a vehicle for other ulterior motives. Ibom Air and Dana Air, two airlines that have done so well for themselves by Nigeria’s aviation standard few months ago entered into a codeshare agreement. Not much has been heard of the deal in what a few people believed may have collapsed and one that is ineffective. It was expected to be a masterstroke for resolving incessant flight delays their passengers are subjected to. The deal was expected to give impetus to reshaping and redirecting the airline industry that is riddled with poor services and other associated vices.

Lack of commitment

For many years, the idea of bringing carriers together to save airlines so much pain as a result of flight delay and cancellations that is becoming the norm now in Nigerian aviation industry had ended as a talk show with no visible plan of actualising it. In February 2022, United Nigeria Airlines announced a codeshare business partnership deal with Air Peace. Chairman of the airline, Chief Obiora Okonkwo, said aviation stakeholders have realised the huge potential in Nigeria, but grossly untapped, and had chosen to do away with unhealthy rivalry and embrace the spirit of collaboration. According to him, from the available records, about 10 million Nigerians travel by air regularly. He added: “We have about 10 operators in Nigeria who are doing scheduled flights. It’s still nothing for 36 states and for 200 million people. It’s still a big market. Therefore, we have agreed among the operators that we should stop unhealthy competition but we should be more collaborative in our approach and our nature. We’ve all agreed that we should all look out and be our brother’s keeper. “I’m here to announce to you in advance, with all sense of joy and happiness that in the next couple of days, I will sit side by side with my brother and friend, Allen Onyeama to sign a groundbreaking agreement that will open up a new way of collaboration in the industry. “In it, you will see Air Peace and United Nigeria working together as partners. If you buy an Air France ticket and then you check in into KLM, don’t you ask yourself why? Why should that not work in Nigeria?” Not much has been heard about the partnership as the two airlines are yet to concretise the deal or work out the modality to actualising it. In what also appeared to be a major step, six Nigerian airlines had in March 2022 said they had entered into an alliance to improve passenger service.

Past failure

The pact tagged ‘Spring Aliance,’ was expected see the country’s largest airlines minimize the impact of delays on travelers and offer better service across the board. The Spring Alliance was to consist of six domestic Nigerian carriers, namely Air Peace, Arik Air, Azman Air, Aero Contractors, Max Air, and United Nigeria. The pact was expected to cover the country and region’s largest airlines, aiding passengers when required. This is a common practice in other countries, especially among significant alliances like oneworld or Star Alliance and through codeshare partners if needed. Unlike other groups, Spring Alliance wants to see more airlines join its ranks in Nigeria and from across Africa. Given that many airlines in the region suffer the same issues, and that the alliance won’t see traffic being hurt for anyone, it could be beneficial to several carriers. Indeed, as the number of carriers in the pact rises, passengers will face fewer disruptions while flying.

Renewed hope

Managing Director of ValueJet, Capt Dapo Majekodunmi, is already thinking in that direction for his airline. He said if the airline is to go international it will be by code sharing with airlines in the African region to give it a better reach. The ValueJet boss said: “There are a lot of places on the West Coast with great potential. We don’t all have to fly to Ghana. You are starting to see overcapacity in that area. There are too many airlines there. We need to look at Africa to see how we can connect with the rest of the world.

Clearing house bottleneck

A former Director-General of Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, who had always clamoured for domestic codeshare/ interlining stated that the idea of interline would help to grow the sector and for the general comfort of passengers who are at the mercy of airlines whenever there are flight delays and cancellation without alternative to passengers who are left stranded at airports. Demuren flayed the slow process of interline/codeshare in Nigeria, stressing that this should have been done long time ago in the interest of the sector.

He, however, stated that the airlines would need the ‘protection’ of the aviation regulatory body to give a bite to the proposed interline as well as act as an umbrella for the project. On his part, the ValueJet boss put the issue of clearing house as a major factor militating against the airline partnership. His words: “Once we can have the platform, the airline can work with it. I think the biggest issue will be how to process the clearing house. It’s workable. You just have to fine-tune the agreement and see where the grey areas might be. That is a direction the operator should all look at. It’s working well with Air France- KLM.”

Last line

Deeper partnerships see two carriers invest more in coordinating their operations. A codeshare is viewed as the next step up from interlining and sees airlines working together by placing their ‘codes’ on each other’s flights.s

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