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Arik financial mess: Airline operators fret over multiple taxes, fear extinction
In the wake of Arik’s financial mess and eventual take over, airline operators under the aegis of Airline Operators of Nigeria (AON) have raised concern over multiple taxes, charges and levies inflicted on them by government that has threatened their existence.
The operators who are showing panic over Arik’s predicament stated that in this time of economic hardship in the nation, it is rather unfortunate that the system has failed to recognize airlines area pivot and one of the pillars to jumpstart the economy of Nigeria of today out of the recession.
They stated that rather, the system is continuously manipulating, feasting and pushing the financial envelope of airlines by inflicting multiple taxes, charges and levies to the extent that airlines are now groaning under the pressure and some are going bankrupt.
Chairman, AON, Capt Nogie Meggison in a statement today said the group has been screaming and complaining about the same issue over the years that have culminated in sending over 27 airlines under in the past 25 years.
He said a case in point is the recent takeover of Arik Air and Aero Contractors by the Asset Management Corporation of Nigeria (AMCON)in the face of huge financial burdens that have shown themselves as fallout of the multiple and sometimes unfair charges, levies and taxes airlines are forced to grapple with on a daily basis.
This he said is without recourse to the fact that aside from all the multiple charges, levies and fees, airlines still have to pay mandatory statutory corporate taxes to relevant agencies.
“Ordinarily, airlines meet so many costly foreign exchange components on daily basis that accounts for 70% – 80% of their direct operational cost such as Jet fuel, spare parts, insurance and simulator training among several others,” said Meggison.
Meggison reiterated that it is unfortunate that domestic airlines have become a cheap target for the agencies that are putting additional pains and burden on operators through multiple taxes, charges and levies which they demand from airlines with impunity.
He noted that the Civil Aviation Act of 2006 (Part 18.12.3) requires that the NCAA regulates civil aviation and the charges imposed by civil aviation authorities and/or agencies. These charges, in consultation with stakeholders, are to be approved and reviewed periodically by both parties.
On the contrary however, airlines are saddled with charges without any form of consultation whatsoever.
He disclosed that domestic airlines, on the average, pay about 35 per cent to 40 per cent of a ticket cost as taxes and charges that come under the guise of statutory levies in addition to other charges.
These, he said includefive per cent Ticket Sales Charge, five per cent Cargo Sales Charge,five per cent Value Added Tax (VAT), Passenger Service Charge, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges, Parking Charges, Terminal Navigational Charge, Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity Charges, and Apron Pass, Ramp Access Charges, ODC and a newly imposed Registration Fee all of which are paid to government agencies.
To him, many of these taxes and charges amount to double taxation such that any incentive seemingly provided by government to airlines is taken back by the agencies.
He accused the Nigerian Airspace Management Agency (NAMA) of charging domestic airlines different kinds of navigational charges which to him should ordinarily be exempted from in line with global best practice, except Nigeria.
His words, “The implemented charges range from Terminal Navigational charges to enroute navigation charges, Over-flight charges, clearance charges, and extension charges. Even foreign airlines don’t pay enroute charges or extension charges which the local airlines are forced to pay.”
“In spite of all these charges, NAMA still gets 23% taken from NCAA 5% Ticket Sales Charge (TSC) Account. Even with all these charges, many of the airports in the country do not have runway lights and navigational landing aids.”
“ This means such airports are only open between 7am and 6pm daily. To this end, airlines can’t fully utilise their airplanes for 24-hours operations. No airplaneor factory machine can be profitable only from 7am to 6pm daylight operations. Airplanes and factory machines are supposed to operate for 24-hours. Airlines also sometimes have to pay arbitrary extension fees or cancel a flight entirely with the attendant burden and inconvenience due to no fault of theirs.”
The open ended 5% TSC, according to the airline captain is to say the least, ambiguous and open to debate and manipulations, stressing that ticket prices differ from one airline to the other, hence it precludes that different airlines are charged varying amounts for the same service.
“It also implies that an airline is being charged different amounts at different times for the same service since prices are not static. Rather than a flat 5% of ticket cost, the TSC should be a fixed charge like standard global practice of N1000 per ticket.”
According to the existing Nigerian VAT Law, Meggison stated that all forms of commercial transportation are exempted from VAT.
“ Only Nigerian carriers are subject to pay VAT. Air transportation in Nigeria is subjected to 5% VAT contrary to the law. Road, Maritime and Rail transportation don’t pay VAT. Even foreign airlines operating in Nigeria don’t pay VAT”, he added.
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