AVIATION INDUSTRY AND NEW TAX REGIME

There should be measures to lighten the burden in the sector

Recent concerns by the Airline operators regarding the new tax laws are worthy of consideration by relevant authorities. With the current spike in airfares that has reduced the number of domestic travellers, there are fears that some of these new provisions could eventually bankrupt the few domestic airlines still in operation. We are already witnessing the consequences of excessive charges in the sector. Last Tuesday, the Federal Airports Authority of Nigeria (FAAN) released its 2025 data which revealed that domestic passenger traffic declined to 12.54 million in 2024, down from the 14.52 million recorded in 2022. That represents a contraction of 13.6 per cent within a period of three years.

A combination of several factors has led to an astronomical increase in domestic flight costs that are now beyond the means of many Nigerians. Meanwhile, domestic airlines are also protesting against existing taxes and charges, on grounds that they constitute a huge financial burden that makes their operation unprofitable and contributes to high fares. This is the vicious cycle that must be dealt with by relevant authorities in the air transport sector. One of the reasons given for the new tax regime in the country was the need to eliminate multiple taxation. No sector exemplifies that than aviation.

Investigations reveal that domestic airlines customers pay no fewer that 54 separate charges, fees and taxes, but only six of these levies are directly visible to passengers. These charges include payment for services offered and are spread across four major government agencies: Nigeria Civil Aviation Authority (NCAA), Nigerian Airspace Management Agency (NAMA), Nigeria Revenue Service (NRS) and FAAN. Beyond the levies and charges paid by the airlines, five of the numerous other charges include passenger service charge (PSC) – domestic and international, common user terminal equipment (CUTE) fee and passenger terminal facility charge all of which go to FAAN. Meanwhile, the same FAAN collects about 18 separate payments from airlines: From $7 per hour to boarding bridge fees pegged at $250 per use. Rent per square meter (office) in Abuja, N75,000; Lagos, N50,000 , and Port Harcourt N55,000 while service recovery charge goes for 20 per cent.

The NCAA also collects many such charges and levies which include ticket sales charge (TSC) of 5 per cent; $20 security levy, while another advanced passenger information system (APIS) levy of $11.5 commenced last December. Airlines also pay the following fees and charges to the NCAA: 5 per cent cargo sales charge (CSC); 5 per cent excess baggage charge (EBC); medical certification issue/renewal fee – N5,000 per crew; cabin crew license issue/reissue – N7,500; aircraft type inclusion on license – N5,000 (per type), and others.

While we have no problem with these agencies, the International Air Transport Association (IATA) has explained that Nigeria should align with international best practices in the aviation industry. It is therefore expected that the NRS will take cognisance of these fees in their review of the taxes for the aviation industry to ensure that airfares do not skyrocket beyond the disposable income of the less than one per cent of Nigeria’s population who travel by air.

Authorities in the sector must understand the meaning of losing almost two million domestic air travellers within a period of two years as revealed by FAAN. Operating airline business in Nigeria is precarious due to high taxation and other disincentive factors, including high insurance premium, high cost of spares due to the high exchange rate and the cost of aircraft maintenance overseas.