Airlines Operators Will Suffer Severely, if January Tax Law Becomes Operational.Says Allen Onyema. By CHiNONYEREM IGWE. Abuja

Air Peace Chairman and Chief Executive Officer, Allen Onyema, has articulated that Nigeria’s domestic aviation sector is on the precipice of a dire crisis as newly instituted tax regulations threaten to escalate ticket prices beyond ₦1 million and potentially drive airlines into bankruptcy. He cautioned that unless immediate measures are undertaken to rescind this policy, the industry could begin to disintegrate within months, with grave repercussions for passengers, financial institutions, and the broader economy.

In an interview with ARISE NEWS on Sunday, Onyema asserted that Nigerian airlines are encumbered by exorbitant taxation, levies, and fees that leave operators grappling for survival, all while being unjustly branded as profiteers. He elucidated that a substantial portion of ticket revenue is siphoned off through statutory deductions, leaving airlines with merely a fraction of what passengers actually remit.

“The Nigerian airlines are excessively burdened by taxes, levies, and a plethora of charges. For instance, on a ticket priced at approximately 350,000 Naira, what actually reaches the airlines is a mere 81,000 Naira. Yet, public discourse portrays airlines as if they are reaping substantial profits. This narrative is patently false.”

He criticized what he termed the multitude of overlapping charges levied on airlines, including a compulsory 5 percent deduction on every ticket sold. “We are enduring multiple taxation and an array of charges. For example, the NCA imposes a mandatory 5% on each ticket. That amount is solely for the NCA. There are numerous other charges as well.”

Onyema contended that these levies ultimately diminish passenger demand and contravene international aviation standards. “The International Civil Aviation Organisation (ICAO) stipulates that revenue generation for government entities is not permissible; rather, the focus should be on cost recovery.”

According to him, global aviation best practices, as delineated by the ICAO, advocate for cost recovery rather than revenue generation. “This means that charges should align with the costs of the services provided to airlines. Ultimately, it is the airlines that bear the brunt of these policies, which is why they are not experiencing growth.”

Onyema reminisced about the 2020 tax law that provided essential relief by abolishing customs duties and VAT on imported aircraft, spare parts, engines, and ticket fares. “The 2020 tax legislation removed customs duties and VAT on imported aircraft and spare parts, as well as VAT on ticket fares. 

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He noted that even with these concessions, airlines continue to contend with a myriad of additional charges nationwide. “Even with those exemptions, airlines are still beleaguered by numerous other charges throughout the country.” Now, the new tax law has reinstated all of those burdens.

He elaborated that acquiring an aircraft valued at $80 million would now incur a 7.5 percent VAT, with spare parts similarly subjected to taxation. “There’s VAT now on the importation of aircraft. Therefore, if you purchase an aircraft for $80 million, you are liable to remit 7.5% of that amount.”

Onyema indicated that the cumulative impact of elevated borrowing costs and renewed taxation renders airline operations untenable. “Funds borrowed from financial institutions are at interest rates of 30–35%. Consequently, when you import spare parts, you incur an additional 7.5% tax. Ticket fares are projected to soar to $1.7 million imminently. At an interest rate of 35%, we are suffocating under this burden. Such practices are untenable.”

He cautioned that the financial strain would inevitably be passed on to passengers, forecasting an unprecedented escalation in domestic fares should the policy be fully enacted. “The 5% deduction from our charges diminishes demand. Under this new tax regime? Yes. Starting in January? Indeed. With a 7.5% tax on ticket fares, ticket prices will imminently reach $1.7 million. If we proceed with this tax reform, Nigerian airlines will face imminent collapse within three months.” he concluded.