Multiple charges cost local airlines 65 per cent revenue

Apparently unable to pay the bills amidst other critical obligations that include maintenance, fuel and personnel, the airlines are more in financial distress with the attendant debt burden cumulatively estimated at N15 billion.

• Carriers list 37 levies, taxes
• Charges are statutory, says NCAA

Local airlines in the country have very slim chances of survival under the alleged current regime of multiple taxes. According to the airlines, sundry charges, under the guise of taxes and levies at airports nationwide, account for at least 65 per cent of revenue accruing to them.

Apparently unable to pay the bills amidst other critical obligations that include maintenance, fuel and personnel, the airlines are more in financial distress with the attendant debt burden cumulatively estimated at N15 billion.

The eight surviving local airlines are at the risk of collapsing if the situation is not checked and made to align with the ‘ ease of doing business’ mantra of the Federal Government. And should the airlines quit operation, it will negatively affect local air travel and revenue accruing to the Federal Government with thousands of aviation workers thrown into the saturated labour market.

The Nigerian Civil Aviation Authority (NCAA) yesterday defended some of the charges, describing them as statutory. The Director General of the apex regulatory body, Capt. Muhtar Usman, said the operational guidelines were clear on the charges and, in fact, mandate operators to collect the charges for the sustenance of the operating environment.

Specifically, airlines, including Arik Air, Aero Contractors and First Nation, are already gasping for breath in their operations. Air Peace, Med-view, Dana Air, Azman and Overland are also grappling with the pains in the rather harsh environment that has made it impossible for airlines to survive beyond 10 years.

The Guardian learnt that besides the five per cent charge on every ticket bought by passengers, which goes to all five regulatory agencies, there are other “illegal” charges on the operators.

They include the second popular five per cent Cargo Sales Charge, five per cent Value Added Tax (VAT), Passenger Service Charge of N1000 per ticket on local route, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges, Parking Charges and Terminal Navigational Charge. Others are Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity charges, Apron Pass, ODC, Registration Fee, Service Recovery Charge, Processing Fee, Avio Bridge, Aircraft Registration and Processing Fee.

The airlines also pay Toll Gate Fee, VIP Lounge, Trolley Service, Clearance Fee, Check-In Counter Charge, Courier/Tarmac/Pre-Release charges, Import Charge (Dom), Export Charge (Dom), Import Royalty, Export Royalty, Ports Charge, Exports Charge, Transhipment, and Concession Fee.

Together, these charges eat deep into earnings leaving the airlines with less than N10,000 on a passenger ticket sold at an average price of N30,000. According to the Chief Executive Officer of Air Peace, Allen Onyema, who confirmed the heavy toll, “If this current regime of taxation is not removed, no airline will survive.”

Onyema said though the charges had been in the system for long and some of them as fallouts of legislations, it was high time they were reviewed to ease the burden on commercial airlines.

“Let even the government raise a consulting firm to go round the country to find out why airlines have been dropping off. Heavy taxation is part of it. We are suffering.

“Air Peace supports payment of taxes to government; no government runs without the citizens paying tax. Airlines must pay their taxes. What we are asking is for these taxes to be streamlined in such a way that it will help us to help the government and help the country.

“Commercial airlines are a catalyst to economic development in any country. That is why every country supports its airlines. We are not asking for any financial assistance but for an enabling environment that makes things work. It is not complimentary for us as a country that all our airlines are dying”, he said.

While Onyema commended the efforts of the current administration and the minister of state for aviation in the sector, he urged them to critically look at what he described as multiple charges in the interest of the economy.

No fewer than 25 registered airlines have gone aground in the last 30 years, and within 10 years of operation. The Chairman of the Airlines Operators of Nigeria (AON), Capt. Nogie Meggison, explained that during the introduction of the five per cent Ticket Sales Charge (TSC) in 2001, many of the charges domestic carriers pay today were not in existence.

“The five per cent TSC was introduced and agreed to make the authority not dependent on funds from government. Many other charges not existing before have been introduced now and domestic airlines have been paying the five per cent TSC as well as the other charges.

“In 2006 when TSC started, NAMA was not charging navigation fees. Now they do and that is multiple charges. Then, FAAN was also not charging. Now they charge N1000 on each domestic ticket and $50 on foreign travel ticket. They collect these and still share in the TSC five per cent,” he said.

In his reaction, the DG of NCAA, Usman noted that section 12 (1) of the Civil Aviation Act 2006 says that there shall continue to be a five per cent air ticket contract, charter and cargo sales charge to be collected by the airlines and paid over to the authority.

“Where lies our business integrity if we cannot give back what is entrusted into our hands to the owner? Even on request, we shy away from our responsibility of paying back the entrusted money to the appropriate owner,” he said.

Usman said it was unfortunate that some of the operators could not distinguish between operational cost and profit margin. “A good businessman endeavours to separate the profit margin from the operational cost. And if we were doing this, we would have been able to separate the five per cent Service Charge from the real ticket sales and draw our operational/profit margin from the actual.

“NCAA has reports that some airlines have tagged the five per cent Ticket Sales Charge (TSC) and five per cent Cargo Sales Charge (CSC) as a tax or levy and as such has become a drain on their earnings.

“This is a misrepresentation of the fact. Passengers, as contained in the ticket, pay the TSC. The airlines’ role is to collect and remit same to the regulatory authority,” he said.

The Secretary General of the Aviation Round Table Initiative (ART), Group Captain John Ojikutu (rtd.), said the unfortunate thing about the rancour between the NCAA and the airlines operators was that over the years, “they have all been benefiting one way or the other from the statutory revenue through various debt concessions and intervention funds.

“Now that such benefits are no longer available and they all have to revert to the statutes quo, there seems to be a kind of love lost between them and the government agencies,” he said.

Ojikutu added that without a conscious review of air travel fares by the airlines, in line with the prevailing dynamics in the market, “their business plans and the sustenance of their operations in the industry will come to naught.”

“It does not make economic sense for them to be charging N16, 000 for a flight of one hour to Abuja, whereas, a flight of six hours to London is N300, 000 and N100, 000 for a flight of one hour to Accra.

“In the same vein, a flight of one hour from Nairobi to Mombasa in Kenya costs $50 or 5000 Kenya Shillings; at the present Dollar/ Naira rate, that translates to about N150,000. The domestic airlines should therefore not expect to sustain their operations and be paying for all the various services and statutory charges by charging N16, 000 on a flight of one hour,” Ojikutu said.