Green Africa attempts ‘Southwest effect’ on air travel in Nigeria - BUSINESSDAY
JUNE 05, 2021
BY Mercy Ayodele
Its first flight is days away yet Green Africa, the Lagos-based startup budget airline, is edging closer to disrupting the Nigerian airspace forever. It has announced its entrance with cheaper airfares for seven routes including Lagos to Abuja, a strategy that looks well suited to a large country where average incomes are low and rising insecurity is increasingly discouraging road travel.
Green Africa’s strategy is not new, at least not on the global scene. It has a similar playbook to the world’s largest low-cost carrier, Southwest Airlines. Southwest, despite being a low-cost carrier has been able to stay profitable through many decades. It even has an economic term named after it popularly called “the Southwest effect”.
Southwest started out with an idea to make air travel accessible for all. While most carriers in the U.S. focused on wealthy travelers, it set out to disrupt the market by giving more people the opportunity to travel by air at a low cost.
Southwest Airlines focused on four main things: a low-cost structure that stayed low due to fast growth, happy employees who liked their jobs and translated that to customers, being future-minded, and differentiated.
Green Africa, just like Southwest, is coming into the Nigerian aviation sector with a low-cost structure with fares between N16,500 and N23,000, which is about a 50 to 70 percent slash in average fares charged by other airlines. Although, there have been questions as to whether the prices will remain low.
“I would not say the price they have started with will be permanent, it is an introductory offer but you can be sure that of you pick the first three airline in the country with the lowest fare in two or three months, Green Africa would be one of them” Olumide Ohunayo, a member of the Aviation Safety Roundtable Initiative (ASRTI) said.
“They have started with a very low-cost aircraft, they are taking a smaller market that fits the Nigerian market and if they build on that and get good maintenance organisations, continue with the same fleet, get better deals with the manufacturer of such aircraft, the maintenance and cost of operation would go lower, their fare will definitely not increase.” Ohunayo said.
Despite the similarity in low fares, differences such as fleet and routes make Green Africa different from Southwest.
Green Africa will use ATR72-600S jetliners, a turboprop, while Southwest operates Boeing 737 jet planes. Turboprops are generally more fuel-efficient than jets whose fuel usage is higher.
A BusinessDay analysis shows that for a one-way trip, a jet aircraft’s flight from Lagos to Abuja consumes nothing less than 8,000 litres and at N220/litre, airlines pay about N1.76 million for fuel alone.
A turboprop consumes about 58-100 gallons of fuel per hour compared to a jet aircraft which consumes about 77-239 gallons of fuel every hour, according to SherapReport. This means on average, turboprop’s fuel consumption is about 155 percent lesser than jet aircraft, which helps Green Africa save costs.
Eight years ago, Southwest expanded its routes to 14 countries outside the US after it gained more domestic passengers than any US airline. For now, Green Africa will fly to seven domestic destinations from Lagos, including Akure, Ilorin, Abuja, Owerri, Port Harcourt and Enugu.
Unlike full-service carriers, Southwest has all its activities tailored towards low-cost delivery. No meals are served, no seats assigned, or any premium class service.
The Nigerian market is dominated by full-service carriers; low-cost airlines like Southwest are uncommon. It is this niche Green Africa wants to fill.
“We are crafting a network plan that will afford customers the opportunity to pursue their economic interest or simply spend more time with family and friends,” Babawande Afolabi, the CEO of Green Africa said during the announcement that the airline was commencing operations.
Unsafe roads make Nigerians take to the air
Green Africa is offering cheap airfares at a time when Nigerians are afraid to travel by road given the rise in the number of kidnap cases on road trips.
Rising insecurity on Nigerian roads showed up in data released by the National Bureau of Statistics (NBS) which reported a decline of 23.75 percent in Road Transport GDP in the first quarter of 2021 from the previous quarter.
PR24 Nigeria Limited, a private security agency released a recent travel advisory report to highlight areas that are currently unsafe and no state in Nigeria was classified as safe.
Of the 36 states, 14 were classified as high-risk regions; 3 (Adamawa, Borno and Yobe) were classified as dangerous while 19 were in the medium-risk group.
Owerri and Enugu, two of the routes Green Africa plans to ply, were classified as high-risk regions which means only essential travel should be made to these states. For regions classified as medium risk travel security is advised when traveling to those areas.
Friendly prices for infrequent flyers
Nigerians travel a lot; after food, Nigerians spend the most on transportation.
According to the 2019 consumption expenditure by the National Bureau of Statistics (NBS), the total household expenditure on food and non-food items was N40 trillion.
More than half of this was spent on food while 43.3 percent was spent on non-food items. In the non-food category, 6.4 percent was spent on transportation, followed by health, education and services with 6.1 percent, 6 percent and 5.5 percent respectively.
With the insecurity, air transport has become the preferred travel option for Nigerians, for those who can afford it.
Data from the NBS also show that on average, bus journeys within cities have increased 72 percent to N3,861 in April 2021 compared to N2,237 recorded in April 2020.
Airfare cost also averaged N36,409 in April 2021, this is an 18.43 percent increase compared to N30,743 recorded in the same period last year, according to data from the NBS.
Transportation costs are increasing at a time when 40 percent of the population is classified as poor. This means an average of four out of 10 individuals in Nigeria live below $1.90 (N780) per day.
Nigeria has the second-highest unemployment rate in the world after Namibia at 33.3 percent. With inflation at 18.12 percent and food inflation is also at 22.7 percent, Nigerians are having a hard time affording food and other basic necessities.
Although Green Africa only covers seven domestic destinations for now its promise to charge airfare as low as 16,500, makes air travel attractive for more Nigerians.