…Onyema: Domestic Carriers’ Challenges Hydra-headed
BY OLAPEJU OLUBI
The Airline Operators of Nigeria (AON) has called on the National Assembly to scrap the existing five per cent Ticket, Charter and Cargo Sales Charge (TSC), describing the system as outdated, burdensome and unfair to domestic airlines.
The association also warned that the survival of several Nigerian airlines could be at risk within the next 30 days unless urgent measures are taken to address the financial and operational challenges confronting the industry.
AON made the demands on Thursday at a public hearing on the proposed revision of the statutory sharing formula for the five per cent TSC at the House of Representatives.
The association was represented at the hearing by a former Managing Director of the Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi.
AON proposed that the percentage-based TSC be replaced with a flat charge similar to the Passenger Service Charge (PSC) model operated by the Federal Airports Authority of Nigeria (FAAN).
Iyayi said the proposed model would create a level playing field for airlines and eliminate disputes over the portion of ticket revenue that should attract the five per cent charge.
“The 5% service charge has outlived its usefulness. It has become a burden on domestic airlines. We have made a submission on this. We have been proactive. As the AON, we have actually produced a document addressing institutional reform for the entire funding policy of the industry, and we will resolve it.
“Beyond the 5% charge, the AON recommends a different model. Rather than charging a percentage, we recommend adopting a structure similar to the one FAAN uses for the passenger service charge, because that creates a level playing field.
“Right now, the 5% is charged on everything an airline earns. I’ll give an example: since March, we’ve experienced fuel shocks worldwide. The average fuel price increase elsewhere in the world was 60–80%, but in Nigeria it was 270%. Since March, domestic airlines have not been able to pay the 5% to the NCAA,” he said.
According to Iyayi, airlines have only been able to make some remittances by increasing their reliance on charter operations, as the sharp rise in aviation fuel costs has severely squeezed revenues from scheduled flights.
“We have managed to remit only because domestic airlines are now taking on charter flights to pick up loads rather than continuing scheduled flights. Essentially, ticket revenue is now going straight into fuel costs, fuel accounts for 40% of an airline’s operating costs,” he said.
The AON also raised concerns over the deployment of aviation-related revenues collected by the Nigerian Civil Aviation Authority (NCAA), particularly fees charged for masts and structures erected within the airspace.
Iyayi said such fees were partly intended to support the production of low-level navigation charts by NAMA, which would facilitate wider use of the country’s airspace.
“The NCAA collects fees on masts, structures erected in the airspace. The reason a mast’s geolocation is required is so that NAMA can produce low-level navigation charts.
“As we speak, helicopters in this country cannot conduct what is called low-level flight at night, and most of our airspace, because we lack low-level navigation charts, can scarcely be used.
“So the optimization of aircraft assets by domestic airlines is significantly constrained. Aircraft that could be flying 8 to 10 hours a day are used for only about 6 hours, because of inadequate infrastructure,” he said.
Iyayi further alleged that the NCAA had collected more than N10 billion over the past 20 years from mast application fees and similar charges, calling for greater accountability and a review of how the funds are deployed.
“In fact, it is understood that over the last 20 years, the NCAA has collected over N10 billion from mast application fees and similar charges. That needs to be reversed,” he said.
The AON, while supporting the proposal to increase NAMA’s share of the TSC, urged lawmakers to consider a broader reform of aviation financing.
It proposed that aviation-related revenues currently paid into the Consolidated Revenue Fund through the Treasury Single Account (TSA) should instead be pooled into a dedicated Aviation Development Fund.
According to the association, the fund could provide sustainable financing for critical infrastructure and other development needs in the sector.
The association argued that the aviation industry generates enough revenue to support such a structure, noting that the NCAA could remit N500 million annually to government and still remain profitable.
Meanwhile, the Chairman of Air Peace, Allen Onyema, warned that Nigerian airlines were operating under extremely difficult conditions and could face widespread failures unless urgent action was taken.
Onyema said the industry’s problems went far beyond the TSC, citing high borrowing costs, fuel expenses, inadequate infrastructure and other operational challenges.
“The Nigerian industry, we don’t have any problem with any union, neither do we have business with the unions. This is an aberration, it has never been heard before.
“A civil aviation authority, if we have problems with them, we discuss. We have no problems with the NCAA. Whenever they call us, we answer them,” he said.
According to Onyema, the difficult operating environment has already contributed to the collapse of several airlines in Nigeria.
“The airlines in Nigeria are operating under very excruciating circumstances. Even IATA has said it, that no airline, that it’s very difficult for any airlines to survive in this country.
“Look at the mortality rate of airlines in Nigeria. Is anybody addressing it? Do you know why it is happening? Over 50 airlines have come and gone. The owners of these airlines succeeded in other businesses, yet they failed in airline business.
“Why not we do self-introspection to find out and tell ourselves the truth? Why are these airlines failing? We don’t need IATA or any outside foreigner to remind us what we are suffering from or what is causing this,” Onyema said.
He also criticised what he described as attempts to use aviation unions to pressure airlines over outstanding financial obligations.
“If they want to shut down the industry, we are waiting for them. Because we’ve spoken and spoken. If anybody thinks that they can use union to intimidate airlines in this country, the person is wasting time,” he said.
Onyema said airlines were already under severe financial pressure, with some borrowing at interest rates of between 30 and 33 per cent.
“All everybody waits is to collect money from airlines. Nobody cares about the lives of these airlines,” he said.
He argued that airlines should not be treated as ordinary revenue sources without consideration for the operational challenges they face, including bird strikes and infrastructure deficiencies.
“Some of us have had 56 bird strikes in one year, yet we pay for the machines to be provided. The part of the money we pay is for the certain infrastructure to be provided.
“Now, if the infrastructure is not provided, and the airlines keep on losing revenue as a result of that, then airlines will now say, maybe we owe money to fuel vendors, we owe money to caterers or ground handlers and some other people,” he said.
Onyema urged the government and aviation stakeholders to find a workable structure for the TSC rather than allowing disagreements over remittances to deepen the industry’s problems.
“Airlines do not want to owe. We don’t want to owe. So maybe there should be a solution on how to go about making it work for everybody.
“You might think of a unit cost so that even announce it that everybody using the Nigerian airline to fly anywhere, this is a unit cost. Maybe 2,000. If you like, make it 50,000. But let people know,” he said.
He said a flat charge would eliminate disputes over what portion of a passenger’s ticket should be subjected to the levy.
“When you do this percentage, you start now asking questions. Which one should be taxed? Which one should not be taxed? Which one should represent five percent? So there’s a lot of confusion that nobody’s talking about,” he said.
Onyema also appealed to the government to protect domestic airlines from measures that could further weaken their financial position, saying the President, Bola Tinubu, had been supportive of the industry.
“President Bola Ahmed Tinubu has been very supportive of Nigerian airlines. And will never, ever allow Nigerian airlines under his watch to go down. So those who are sponsoring union to bring airlines down, we wish them well,” he said.
He warned that the situation had become so serious that airlines faced an existential threat.
“Going into aviation is not a piece of cake. It is an industry that is not very rewarding. It is capital intensive, yet less rewarding.
“Today, we are facing a phase that has existential threats except something drastic is done very quickly. Within the next 30 days, a lot of airlines might go extinct,” Onyema said.
He maintained that airlines were already cooperating with the aviation authorities and had continued to respond to directives from the Minister of Aviation and Aerospace Development and the Director-General of the NCAA.
“The airlines have been answering the calls of the minister. The airlines have been answering the calls of the DG NCAA. The airlines have been cooperating. The airlines have been listening to them and doing the best they can do under the circumstances,” he said.
The AON’s demand comes amid renewed debate over the statutory sharing of the five per cent TSC among aviation agencies, with stakeholders divided over whether the existing structure remains sustainable for airlines and regulators.
The association said any review of the charge should be part of a broader reform of aviation financing designed to ensure that airlines remain viable while government agencies have sufficient resources to discharge their responsibilities.
Olapeju is a journalist and aviation reporter.
