Air Peace: Strategies to gain competitive advantage in battle for the skies

CONGRATULATIONS to Air Peace on its inaugural flight to London and for achieving full bookings for the upcoming months, thanks to attractive ticket prices.

Over the past fortnight, Air Peace has been making waves on social media for various reasons. On a positive note, the airline shared a LinkedIn post featuring a picture of former Nigerian President, Chief Olusegun Obasanjo, aboard a return flight to London.

The caption highlighted his positive experience, stating, “I went, it was pleasant. I came back, it was even more pleasant.” However, on a different note, Nigeria Stories recently reported that the United Kingdom Civil Aviation Authority contacted the Nigerian Civil Aviation Authority regarding alleged violations of aviation safety regulations by Air Peace.

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The significance of Air Peace’s impact on airfares along the Lagos-London route cannot be
overstated. Since commencing operations on March 30, Air Peace has maintained its round-trip economy ticket price at $1,000 (₦1.2 million), a substantial reduction compared to the previous rates charged by international airlines, which could soar up to $2,500 (₦3 million).

This bold pricing approach has disrupted the established norms, prompting foreign carriers to reassess their pricing frameworks. To uphold customer loyalty and ensure long-term viability, it is imperative for Air Peace to explore additional strategies for differentiation. I have outlined these strategies using Austin’s
Four Models of Competitive Strategies below:

Technological Leadership
This approach is commonly embraced by firms that have secured a substantial
leadership edge on the innovation spectrum. Their dominant position within their specific
market niche is profound, making it exceedingly challenging for competitors to replicate
or close the gap. Companies like Apple, Alphabet, Airbus, SpaceX, Netflix, and Tesla,
among others, adeptly employ this strategy to significant effect. Typically, they command
premium prices for their offerings, allowing for greater investment in ongoing research
and expertise, thus fortifying their technological supremacy and perpetuating their cycle
of success.

Service Excellence
This strategy is often embraced by companies that may not necessarily lead in technology but excel in delivery and customer experience to secure patronage and foster loyalty. Airlines like Emirates, Singapore Airlines, Qatar Airways, and Japan consistently rank among the world’s top 10 airlines as voted by travelers worldwide, thereby drawing more patronage.

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Customer Intimacy (Personalized Customer Engagement)
This approach is predominantly employed by companies that strive to create a familial
bond with their customers. They foster a sense of intimacy with their clientele,
exemplified by Ghana’s Africa World Airways (AWA), which has established a reputation
for punctuality in West African travel. Air Peace appears to be following suit with this
strategy, offering popular Nigerian cuisine and beverages on the Lagos-London route,
and outfitting their crew in vibrant Nigerian attire. Companies employing this strategy
often boast prolonged customer retention rates. They possess a deep understanding of their customers, accommodating their unique preferences, while customers reciprocat with steadfast loyalty.

Cost Leadership
This strategy is predominantly adopted by companies that have enjoyed an early lead in
product development and launch, leveraging the returns on their investments over time.
They employ low pricing to dissuade competitors from entering the market. A classic
example is Coca-Cola and Pepsi-Cola. Additionally, other companies that may employ this strategy are those that have accessed the experiences and intellectual property of more advanced competitors without incurring the costs and challenges of research and development. They are content to price their products relatively lower to attract patronage. Many established companies with mature infrastructure also aim to increase their market share through periodic sales promotions, satisfied with extracting contribution margin
from fixed costs.

Airlines often utilize this strategy during low seasons to improve their
load factor rather than flying with empty seats or cargo space. They prefer to capture
customers at any price rather than allow competitors to benefit from lost sales.

Bringing it All Together

In the fiercely competitive landscape of the airline industry, pricing strategies serve as a
cornerstone in attracting passengers and maintaining a competitive edge. Employing competitor
pricing, a dynamic and data-informed approach, enables airlines to swiftly adapt to market fluctuations and consumer preferences while optimizing revenue streams. Airlines continuously fine-tune their fares in response to market dynamics, competitive maneuvers, and various other factors, employing a seamless and automated process to uphold competitiveness, optimize load factors, and maximize revenue streams.

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While competitive pricing may serve as an initial strategy to penetrate the market and garner market share, I am cautious about relying solely on it for sustained success. It’s essential to recognize that no matter how aggressively priced one may be, there’s always someone offering a lower fare. This approach risks triggering a downward spiral in pricing, potentially leading to a race to the bottom. In such a scenario, financially robust incumbents may outlast vulnerable newcomers, only to subsequently increase prices to recoup lost revenue once the newcomers are forced out of the market. This fate should not befall Air Peace.

Austin Okere is a thought leader, and business mentor. An Entrepreneur-in-Residence at
Columbia Business School, New York, Austin has also facilitated at the United States
International University in Kenya and has been appointed to the Advisory Board of the Global Business School Network in Washington in recognition of his contribution to the development of business education and knowledge transfer in Africa. CWG Plc, the company which he founded has been recognised as a ‘Global Growth Company’ by the World Economic Forum and is the largest security listed in the Technology Sector of the NGX.

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