Given the industry thin margins, particularly taking cognizance of the scale and size of domestic operations, the corporate income tax regime should be reviewed downwards to 5% for airline companies, but allowing an immediate 24-month tax holiday as a cushion for the effects of the COVID-19 pandemic.

Additionally, the Value Added Tax (VAT) should be removed from airline ticket sales once and for all. The government in 2006 had accepted the recommendation of the Air Marshall Paul Dike’s PTF as contained in its reports and the 2006 White Paper to remove VAT from airline ticket sales.

Yet in 2020, despite further pronouncements by the President Goodluck Jonathan’s government in 2013 and the present government in 2018, VAT is charged on all airline ticket sales.

Furthermore, the 5% TSC and CSC charged by the NCAA on airline ticket and cargo sales should be revised to a unit charge per passenger or per kilo instead of the ad valorem model presently used.

This model creates a distortion in the marketplace and does not allow for domestic airlines to compete on the basis of fares, the main objective of the industry deregulation.

In terms of the possible structure of a bailout for the industry, the major component that would immediately address the industry’s main concern and provide the much-needed stability is cash infusion.

However, the infusion of cash into the airlines should come by way of low interest, unsecured long term loans preferably denominated in United States Dollars.

The government through the Asset Management Company of Nigeria (AMCON) could secure the right to a certain number of (non-voting) shares depending on the loan amount to each beneficiary airline, which it could finally offload through the Nigerian Stock Exchange as part of the deal.

Also, the government could subsidize the refining of Jet fuel locally and sell to the airlines at hugely discounted rate, to stem the possible cartelization of jet fuel by the few suppliers who collude to determine pricing to the detriment of the airlines.

In summary therefore, the government’s intervention into the aviation sector as bailout should comprise a combination of several key inputs specifically targeted to address major subsisting issues in the industry.

These include:

• Review of TFCs to determine continued relevance and equity;

• Review of Corporate Income Tax to 5%;

• Removal of VAT from Airline Ticket Sales;

• Introduction of Unit model TSC & CSC; •

Provision of US Dollar denominated low interest, unsecured long term loans;

• Subsidization of Jet Fuel; Importantly the ripple effects of the various actions and or inactions of the several industry stakeholders in the wake of this pandemic cannot be over-emphasized, considering the interdependence and high level of interconnectedness of the participants.

From the aircraft manufacturers, airlines, Airport Companies, Air Navigation Service Providers, fuelling companies, ground handling companies, weather information service providers, flight training institutions to the Regulators, the symbiotic nature of the relationships is vitally important to the sustenance and growth of the industry and ultimately mutually beneficial.

As asserted by the New York Times in a recent Article, it noted that, “pandemics typically have two types of endings: the medical, which occurs when the incidence and death rates plummet, and the social, when the epidemic of fear about the disease wanes.

” We are yet to see either the medical ending with credible vaccines solution or the social terminal point, with the exacerbated fear mongering.

This has been fuelled in large part by the social media, which has since become the engine of rumours, conspiracy theories, prejudices and superstitions, culminating in a state of helplessness, not encouraged by the complete lack of knowledge about the disease.

When one adds to this evolving reality the fecundity and improvidence of the impoverished poor of the community, the overall impact of this pandemic is yet unfolding. As with other similar industry exogenous shocks of the past, the after-effects and toga of the COVID-19 pandemic will be worn by the aviation industry, with its phenomenal adverse impact felt most by the airlines, for whom the return route will be arduous, long-winding and challenging.

With the rollout of new operating protocols by the various agencies, the regulator and government as a precursor to the commencement of operations again, the direct and indirect financial implications also call for close consideration.

Wole Shadare