Arik Price Cuts Hurt BA, Virgin Atlantic
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Arik Price Cuts Hurt BA, Virgin Atlantic
I am sure it is not only the Price cut that is affecting BA etc, but also the economic glut which has made airlines battling with low pax.
The price war initiated by Arik Air for economy class passengers travelling from Lagos to London, is constituting a big threat to the dominance of British Airways and Virgin Atlantic Airways on the lucrative international route.
Arik commenced non-stop daily flights from Lagos to London Heathrow Airport late last year, and immediately slashed the prices of economy and premium class tickets thus hurting BA and VAA, which hitherto flew the bulk of London terminating passengers.
As Arik expands its flight destinations, rival local airline Virgin Nigeria Airways is celebrating the arrival, late Thursday, of its second brand new Embraer aircraft, which is scheduled to make its inaugural flight to Abuja next week Tuesday.
According to a review undertaken by Financial Derivatives Company (FDC), a Lagos-based economic research firm and presented at the July Executive Breakfast Meeting of the Lagos Business School, “the price war on the route initiated by Arik is hurting BA and Virgin Atlantic’s economy passengers and London terminating traffic.”
The review, a comprehensive summary of global economic and business indicators and events for the month of June and presented by Bismack Rewane, FDC’s managing director, indicated that BA has started an aggressive response to the Arik threat.
“BA is responding aggressively in the corporate market. It is offering corporate discounts in the premium classes (Business and First Class cabins) and on select routes. It has intensified customer service initiatives and interface,” the review noted.
Further investigation by THISDAY revealed that the Arik threat is more pronounced in the battle for budget travellers (Economy Class passengers), where the local airline charges N174,000 (about $1,160 – taxes inclusive) for a return ticket to London and has become a major attraction.
On the contrary, BA’s cheapest Economy Class return ticket to London is $1,460 while VAA’s cost $1,432.
Arik’s cheapest Busi-ness Class return ticket to London is N500,000, about $3,333. To fly BA, it cost $4,825 while VAA charges $3,799.
Arik uses a brand new Airbus A340-500 long-range aircraft on the Lagos- London route offering Business Class passengers flat beds, individual television monitors, along with other in-flight entertainment comparable to any airline in the world.
However, Arik’s attempt to lure passengers has not been that pronounced in the battle for premium class passengers on the route despite its low fares.
For most premium class passengers to London, analyst said their preferred choice remains BA and VAA owing to a number of factors, including safety and their track records, loyalty programmes, reliability and the status symbol. As a result, both airlines have been able to ward off Arik’s challenge in this area.
This notwithstanding, the report by FDC noted that premium traffic in general on the international routes is shrinking, especially in the First Class cabin.
This, it attributed to factors such as exchange rate adjustment, declining consumer income and corporate expense control. Declining premium traffic has been a big blow to BA’s bottom line.
According to the review, BA recently announced that it would ground aircraft, slash available seats and postpone delivery of its A380 Airbus.
“BA, like all others airlines, is facing a recession-driven decline in passengers. In June, it carried 2.93 million passengers. This is 5 per cent less than June 2008.
“It has cut summer capacity by 3.5 per cent and 5 per cent in October. The increasing capacity of most routes and falling purchasing power are driving down yields,” said the review.
In addition, lower fares to London from Lagos (via Rabat) offered by Royal Air Maroc has also become a further threat to the dominance of BA and VAA on the route.
The review noted: “The $250 London ticket by Royal Air Maroc is receiving huge patronage.
“The stop over in Casablanca is considered by budget travellers a dream come true.”
The review further revealed that Arik has also become a threat to South African Airways on the Lagos-Johannesburg route.
Arik’s lowest Economy Class return ticket to Johannesburg costs just N93,500 – all taxes inclusive. It charges N458,000 for the lowest Business Class return ticket.
SAA on the other hand charges between N130,000 and N160,000 for Economy Class tickets and N500,000 to N600,000 for Business Class.
“Arik’s price cut and daily frequency to J’burg is a blow to SAA. This has forced SAA to respond with a further price cut and increased its frequency to five a week. There is a lot of red ink on the J’burg route,” said the review.
On the domestic route, the review revealed that “the price and capacity war is continuing between VNA, Arik & Aero Contractors. However, VNA’s new management team has been able to stay focused and the airline continues to dominate the Abuja, Accra, Abidjan & Port Harcourt traffic.
“It continues to outflank competitors in regional markets. VNA now controls 40 percent of Accra–Lagos traffic, 18 percent of the Lagos–Abuja market.”
VNA is expected to remain strong on domestic and regional routes with the arrival of a new Embraer aircraft and the return of one of its Boeing 737 aircraft from maintenance.
THISDAY ONLINE / Nigeria news / African views on global news
Arik commenced non-stop daily flights from Lagos to London Heathrow Airport late last year, and immediately slashed the prices of economy and premium class tickets thus hurting BA and VAA, which hitherto flew the bulk of London terminating passengers.
As Arik expands its flight destinations, rival local airline Virgin Nigeria Airways is celebrating the arrival, late Thursday, of its second brand new Embraer aircraft, which is scheduled to make its inaugural flight to Abuja next week Tuesday.
According to a review undertaken by Financial Derivatives Company (FDC), a Lagos-based economic research firm and presented at the July Executive Breakfast Meeting of the Lagos Business School, “the price war on the route initiated by Arik is hurting BA and Virgin Atlantic’s economy passengers and London terminating traffic.”
The review, a comprehensive summary of global economic and business indicators and events for the month of June and presented by Bismack Rewane, FDC’s managing director, indicated that BA has started an aggressive response to the Arik threat.
“BA is responding aggressively in the corporate market. It is offering corporate discounts in the premium classes (Business and First Class cabins) and on select routes. It has intensified customer service initiatives and interface,” the review noted.
Further investigation by THISDAY revealed that the Arik threat is more pronounced in the battle for budget travellers (Economy Class passengers), where the local airline charges N174,000 (about $1,160 – taxes inclusive) for a return ticket to London and has become a major attraction.
On the contrary, BA’s cheapest Economy Class return ticket to London is $1,460 while VAA’s cost $1,432.
Arik’s cheapest Busi-ness Class return ticket to London is N500,000, about $3,333. To fly BA, it cost $4,825 while VAA charges $3,799.
Arik uses a brand new Airbus A340-500 long-range aircraft on the Lagos- London route offering Business Class passengers flat beds, individual television monitors, along with other in-flight entertainment comparable to any airline in the world.
However, Arik’s attempt to lure passengers has not been that pronounced in the battle for premium class passengers on the route despite its low fares.
For most premium class passengers to London, analyst said their preferred choice remains BA and VAA owing to a number of factors, including safety and their track records, loyalty programmes, reliability and the status symbol. As a result, both airlines have been able to ward off Arik’s challenge in this area.
This notwithstanding, the report by FDC noted that premium traffic in general on the international routes is shrinking, especially in the First Class cabin.
This, it attributed to factors such as exchange rate adjustment, declining consumer income and corporate expense control. Declining premium traffic has been a big blow to BA’s bottom line.
According to the review, BA recently announced that it would ground aircraft, slash available seats and postpone delivery of its A380 Airbus.
“BA, like all others airlines, is facing a recession-driven decline in passengers. In June, it carried 2.93 million passengers. This is 5 per cent less than June 2008.
“It has cut summer capacity by 3.5 per cent and 5 per cent in October. The increasing capacity of most routes and falling purchasing power are driving down yields,” said the review.
In addition, lower fares to London from Lagos (via Rabat) offered by Royal Air Maroc has also become a further threat to the dominance of BA and VAA on the route.
The review noted: “The $250 London ticket by Royal Air Maroc is receiving huge patronage.
“The stop over in Casablanca is considered by budget travellers a dream come true.”
The review further revealed that Arik has also become a threat to South African Airways on the Lagos-Johannesburg route.
Arik’s lowest Economy Class return ticket to Johannesburg costs just N93,500 – all taxes inclusive. It charges N458,000 for the lowest Business Class return ticket.
SAA on the other hand charges between N130,000 and N160,000 for Economy Class tickets and N500,000 to N600,000 for Business Class.
“Arik’s price cut and daily frequency to J’burg is a blow to SAA. This has forced SAA to respond with a further price cut and increased its frequency to five a week. There is a lot of red ink on the J’burg route,” said the review.
On the domestic route, the review revealed that “the price and capacity war is continuing between VNA, Arik & Aero Contractors. However, VNA’s new management team has been able to stay focused and the airline continues to dominate the Abuja, Accra, Abidjan & Port Harcourt traffic.
“It continues to outflank competitors in regional markets. VNA now controls 40 percent of Accra–Lagos traffic, 18 percent of the Lagos–Abuja market.”
VNA is expected to remain strong on domestic and regional routes with the arrival of a new Embraer aircraft and the return of one of its Boeing 737 aircraft from maintenance.
THISDAY ONLINE / Nigeria news / African views on global news
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what bull......t,
Am yet to see how ARIK can hurt BA/VA,if they are hurting how come they are fully booked with cut throat fares?
I would think its ARIK hurting as they need to drop fares real low,at peak season????
BA/VA monopoly remains massively intact,supported,by Nigerian govt and a network of connections out of LHR,they have left VK/BELLVIEWS crumbs for ARIK.
The lack of support from the govt for the locals with unhindered multiple destinations in Nigeria does not help either,they should kick everyone out of ABV!!!there are more than enough locals to connect out of MMIA,but those self serving bas....ds in govt!!!!!!
Am yet to see how ARIK can hurt BA/VA,if they are hurting how come they are fully booked with cut throat fares?
I would think its ARIK hurting as they need to drop fares real low,at peak season????
BA/VA monopoly remains massively intact,supported,by Nigerian govt and a network of connections out of LHR,they have left VK/BELLVIEWS crumbs for ARIK.
The lack of support from the govt for the locals with unhindered multiple destinations in Nigeria does not help either,they should kick everyone out of ABV!!!there are more than enough locals to connect out of MMIA,but those self serving bas....ds in govt!!!!!!
