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African airlines need state protection to survive price wars

African countries should not refrain from countering the protectionist strategies used by foreign governments
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In March 2024, Air Peace, a leading Nigerian airline, began its Lagos-London route, becoming the only Nigeria-owned airline plying this route. This launch triggered a competitive price battle among existing airlines operating on the same route – namely British Airways, Lufthansa and Virgin Atlantic – who swiftly responded by drastically reducing their prices, even below their operational costs. This move is widely perceived as a calculated attempt to undercut Air Peace and potentially drive them out of the market. This situation highlights the imperative of supporting and making the protection of African-owned corporate businesses operating within Africa a fundamental aspect of the foreign and/or economic policies of African nations. Here is why!

For starters, if the move to undercut Air Peace is successful, it could lead to dire consequences for Nigerian travellers, potentially leading to a resurgence of high ticket prices in the future. Indeed, foreign airlines had long maintained exorbitant ticket prices, particularly for flights originating from Nigeria, creating a stark disparity in airfare costs based on geographical location until Air Peace disrupted the market with its more affordable fares. Air Peace brought relief to Nigerians, who had reportedly spent about $4.66 billion on foreign air travel in 15 months between 2022 and 2023. If nothing is done to support Air Peace in the ongoing price war targetted to undo the local carrier, this relief will be short-lived.

Secondly, the fleecing of Nigerians by these foreign airlines, especially the big players like Lufthansa, British Airways and Virgin Atlantic these past years, brings to the fore the dark side of  Europe’s imperial history in Africa which is characterised by the exploitation of Africa’s wealth for the development of Europe. Europe has long leveraged its corporate business providers operating in Africa to repatriate billions of dollars back to their countries, perpetuating a cycle of economic dependency and exploitation. Estimates suggest that significant amounts of money are repatriated to Britain and other Western countries from Africa annually, draining the continent of much-needed resources. Alongside the depletion of the continent’s foreign currency reserves, Africa’s economies are denied the multiplier effect they would have enjoyed if the revenue accrued by foreign corporations were reinvested on the continent instead of being repatriated to other countries. As a result, Africa’s currencies are devaluated and, as research findings show, more wealth leaves Africa every year than enters it by more than $40bn, which supports the argument that Africa is not poor; rather, the continent simply suffers the consequences of its wealth being stolen and plundered.

Thirdly, African countries should not refrain from countering the promotion and protectionist strategies used by foreign governments. In an interview granted to Channels TV, the CEO of Air Peace, Allen ONYEMA claimed that the foreign airlines are able to slash their prices below their operating cost because they are being supported by their respective governments. Our governments must provide better support for businesses owned by Africans and operating internationally from the continent. This support could include financial incentives, regulatory assistance, and diplomatic advocacy.

Examples abound of developed countries offering substantial support to their businesses operating internationally, ranging from subsidies to diplomatic assistance. For instance, after Boeing lodged a complaint with the US Department of Commerce, alleging harm to its business due to Delta’s acquisition of Bombardier jets at low prices, anti-dumping and countervailing duties of 300% were imposed on Bombardier. In response, the Canadian government took proactive measures, engaging directly with Boeing and the American administration, including governors, congress members, and the administration. Prime Minister Trudeau affirmed his government’s determination to push back against Boeing, which later resulted in the levy being overturned by the United States International Trade Commission.

Moreover, in 2018, Canada implemented a Trade diversification strategy that was aimed at securing more opportunities for Canadian exporters and investors to compete and succeed in thriving and fast-growing global markets and sectors. Nothing prevents the governments of African nations from taking similar steps for corporations owned by Africans.

The current standoff between Air Peace and other International Airlines in Nigeria should serve as a lesson for the Nigerian government and other governments across Africa. African countries must reassess their foreign policies to prioritize the protection of African-owned businesses operating internationally. Such a strategy is crucial for safeguarding the economies of African nations. The recent devaluation of the Naira and high unemployment rates emphasize the urgent need for drastic actions such as this.

By prioritizing indigenous businesses, governments can stabilize the economy, create jobs, reduce dependency on imports, safeguard foreign exchange reserves, and enhance Africa’s international standing. This strategic approach is essential for driving economic resilience, fostering entrepreneurship, and promoting sustainable development across the continent.

Through strategic foreign policy initiatives and targeted support measures, African governments can empower their businesses to compete on a level playing field and secure a brighter future for their economies and citizens.

 

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