The Chief Executive Officer of Air Peace Limited, Allen Onyema, has called for an urgent review of taxes, charges and other financial obligations imposed on Nigerian airlines, warning that the burden is threatening the survival and competitiveness of operators.
Onyema made the call in his keynote address at the 30th Annual Conference of the League of Airport and Aviation Correspondents (LAAC), themed “Towards a Sustainable Aviation Industry: Balancing Government Revenue Demands with Sector Growth.”
He said the Federal Government needs to balance its revenue expectations with the financial realities of airlines, arguing that excessive taxation and charges could undermine the very industry from which government seeks to generate revenue.
According to Onyema, Nigerian airlines face as many as 54 different taxes, fees and charges, a situation he said has made the country one of the most difficult environments in which to operate an airline.
Quoting figures attributed to the International Air Transport Association (IATA), he said, “Airlines face up to 54 different taxes, fees and charges across four major continental areas.”
He further claimed that taxes and charges could account for as much as 65 per cent of airline costs in Nigeria.
“In fact, in Nigeria, taxes and levies can consume up to 65 per cent of the airlines’ costs,” Onyema said, attributing the figure to IATA.
He argued that the high financial burden is contributing to the high mortality rate of Nigerian airlines, with many operators unable to survive for long periods.
“You are right to say that Nigeria has the highest mortality rate of airlines. I mean, the highest failure rate of airlines worldwide is something that we have to sit down and address,” he said.
Onyema said the problem is not necessarily the competence or commitment of airline owners, noting that many operators have been successful in other businesses but struggle to sustain airlines because of the operating environment.
“The owners of these airlines were successful in other businesses and are still successful in some other businesses today. Why? That’s the question,” he said.
The Air Peace boss also highlighted the high cost of accessing capital in Nigeria, saying local airlines are expected to compete against foreign carriers that enjoy much cheaper financing.
According to him, Nigerian airlines could borrow at interest rates of about 30 per cent, while some of their foreign competitors could access funds at rates as low as 3 to 4 per cent.
“When we borrow money, we pay as much as 30 per cent,” Onyema said. “At the same time, we are expected to compete at the same level with other people who are getting their financing at three and four per cent. What kind of people are we?”
He said the financing gap places Nigerian airlines at a serious competitive disadvantage.
Onyema also renewed his criticism of the five per cent Ticket Sales Charge (TSC), arguing that the percentage-based model places an additional burden on airlines because the charge rises with the value of tickets.
“When we talk about five per cent, we’ve been criticising this since time immemorial. Nobody listens,” he said.
He proposed that government consider replacing the percentage-based charge with a flat, unit-rate fee per passenger, arguing that the arrangement would make the charge more predictable.
“If you put a unit cost, a flat rate today, say ₦7,000 or ₦5,000, it may be easy,” he said.
According to him, airlines could even generate more revenue for government under a predictable flat-rate system.
“We could even contribute more if you make it a unit rate, a flat rate. The airlines can contribute more,” he said.
Using a hypothetical example, Onyema said that if the average contribution is fixed at ₦5,000 or ₦7,000 per passenger, airlines and government would have greater certainty over the amount payable.
The Air Peace CEO also gave an indication of the rising cost of operating flights in Nigeria, saying the direct operating cost per seat has reached about ₦180,000.
“The direct operating cost per seat in Nigeria now is around ₦180,000. It’s around ₦180,000 per seat,” Onyema said.
He said efforts by an airline to reduce fares for passengers could be undermined by percentage-based charges imposed on the ticket.
“If I decide I want to maybe do ₦50,000, and by the time we get to supply we’ll start flying, let’s start. If I start at ₦50,000, five per cent TSC, the ₦50,000 is only half of the direct operating cost. Somebody will wait and collect five per cent of that same ₦50,000. Are you not cutting my direct operating cost? You are,” he said.
Onyema also cited aviation’s contribution to the Nigerian economy, saying the industry contributes approximately ₦3.5 billion to GDP and supports more than 217,000 jobs, figures he attributed to IATA.
“The aviation industry contributes about ₦3.5 billion to gross domestic product and sustains over 217,000 jobs, according to IATA,” he said.
He argued that the significance of aviation extended beyond airline revenues, as the sector supports employment and economic activity across tourism, hospitality, logistics and other parts of the economy.
Looking beyond Nigeria, Onyema said Africa’s aviation sector contributes about $75 billion to GDP and supports millions of jobs, while the continent’s aviation market is projected to grow by 4.1 per cent over the next 20 years, potentially doubling by 2044.
He said the figures demonstrate why governments across the continent need to view aviation as an economic enabler rather than primarily as a source of taxation.
“Africa’s aviation sector is a vital economic driver, contributing $75 billion to GDP and supporting millions of jobs,” he said.
Onyema stressed that airlines are not opposed to government revenue generation, but want a more balanced approach that would allow operators to survive and grow.
“We are not against government agencies taking money. We support it. What we are saying is that we must balance the act.”
He warned that the failure of airlines would have wider consequences for the economy, including for banks that finance aviation businesses.
“If the airlines continue to die, remember, banks will take a hit also. Banks will take a hit,” he said.
He therefore urged government ministries, agencies and other stakeholders to approach the industry’s concerns with an open mind.
One Comment