Airlines retain ticket rates amid end to 5% VAT

Air travellers expecting marginal review of fares following the recent removal of mandatory five per cent Value Added Tax (VAT) on transportation may have to wait longer.

Airlines operators, who though lauded the gesture, saw the development as more of compensation to the airlines that are over burdened by multiple charges, than gains to the passengers that have “usually been flying low-cost”.

A cross-check of the airlines’ booking platforms yesterday, about a week after the VAT suspension policy went public, showed that the airlines largely retained same rates as of a week before.

Except Arik Air that has lately introduced a super and smart saver promo, other airlines retained an average fare of between N24, 000 to N28, 000 Economy Class ticket for Lagos-Abuja flight of 24 hours away.

Arik Air, last Friday, introduced the ‘Now everyone can fly promo’ to all destinations, with tickets of N16, 000 and N18, 500 for seven and four days advanced booking, in that order.

Spokesperson of the airline, Banji Ola, confirmed the special offer, but with a condition that the tickets are available at the time of booking.

Dana Air Media and Communications Manager, Kingsley Ezenwa, told The Guardian that the airline would be more than happy to plough back the gains of VAT cancellation to the business and ticket fares subsidy, but may not happen soon.

Ezenwa noted that the expected gains are subject to actual implementation of the policy and the review of other multiple charges in the aviation industry.
He said: “Let us not forget that the reason some airlines charge so exorbitantly is the multiple charges that include VAT, high cost of aviation fuel and so on. Once these come down, the sector will surely be the better for it.
“We at Dana Air have a policy of low fares for our customers, though very difficult to operate. So, reductions in charges are opportunities to reinevest in our operations and further push the gains to our customers. We may not see these in the immediate but surely in the long-run,” Ezenwa said.

Apparently in agreement, Secretary General of the Aviation Safety Round-table Initiative (ASRTI), Group Captain John Ojikutu (rtd), said it is difficult to see the rationale for cheaper fares just yet.

Ojikutu raises some questions: “Does it make sense to reduce ticket fares by about N4,000 because of just N1,000 VAT grace from government? I think these airlines can never get commercial aviation right.

“What sense is there in still selling tickets to Abuja at N25K ($70) or N18K ($50) when fuel and dollar prices have increased by 30 per cent and 100 per cent respectively? The truth is hiding somewhere between them and the government officials.

“Government says, the VAT is charged on passengers not on airlines, that makes sense if passengers tickets would still be charged five per cent; but would the airlines be faithful in collecting the TSC for government? What assurances are there that airlines would render the correct figures of passengers traffic and tickets earnings on the BSP platform?”