High air fare, taxes stall aviation growth

• FG, task force working to cut rates, says Sirika 
Slow growth in the aviation sector has again been linked to multiple taxes and charges levied against operators and passengers in the country.

The cumulative high rates, according to African Development Bank (AfDB), is one of the highest in the world, making it almost impossible for local airlines to survive and air passenger traffic to grow beyond eight per cent of the population.

In reaction, Minister of State for Aviation, Hadi Sirika, said the Federal Government is not unware of the problem and a constituted task force team of stakeholders are currently working to change the narrative.

The sector, according to the National Bureau of Statistics (NBS), has consistently contribute just 0.4 per cent of the Gross Domestic Product (GDP), with just eight per cent of the population traveling by air.

In places like Rwanda, Ghana, Kenya, Ethiopia and South Africa, the aviation contribution to GDP ranges between 10 and 20 per cent.

In a statistics the Federal Airports Authority of Nigeria (FAAN) made available to NBS, a total of 41,932 flights (both landing and takeoff by domestic and international airlines) were recorded across all airports in the first quarter of 2017.

Of the total, about 21,000 flights (over 50 per cent) of the flights were recorded in Lagos, while Abuja had 10,000 (25 per cent) of the share. Spread over four quarters, Abuja will record an average of 40,000 flights a year, while all 26 airports nationwide have an average of 167,728.

Comparatively, the total aircraft movement of 40,000 in Abuja is small when placed beside London Gatwick Airport with a total of 280,666 aircraft movement in 2016 and Mumbai’s Chhatrapati Shivaji International Airport, India, with 305,465 movements between April 2016 to March 2017.

The Guardian recently reported that there are a total of 37 sundry charges levied at airports nationwide. These in total account for at least 65 per cent of revenue accrued to the eight operating airlines. The airlines are the last surviving eight out of over 40 the Nigerian Civil Aviation Authority (NCAA) registered for operations in the last 17 years.

Apparently unable to pay the multiple charges amid other critical obligations that include maintenance, fuel and personnel, the local airlines are more in financial distress with the attendant debt burden to various agencies estimated at N15 billion.

President of the AfDB, Dr. Akinwunmi Adesina, told The Guardian in Abuja that Nigeria cannot continue with the heavy charges and expect the sector to grow.

Adesina noted that the problem is not peculiar to Nigeria or fares within, but to all of Africa and intra-African travels, where the cost of air travel remains exorbitantly high and is 200 per cent more than costs in the European Union and 250 per cent higher than in India for similar distances.

He added: “A big part of this is the very high taxes, fees, and levies that are charged in Nigeria and other African countries. For example, it costs N39,168 ($128) to fly between London and Rome, but N182,682 ($597) to fly between Abidjan and Niamey; a shorter distance. And just to go from Johannesburg in South Africa, to next door neighbor Lilongwe in Malawi, the cost is N124, 236 ($406). Again, a much shorter distance than from London to Rome.

“If you require another example of this serious imbalance, consider for a moment that taxes paid for a Lagos to Kinshasa ticket amounts to N121, 482 ($397) which is 300 per cent higher than the total air travel costs between London and Rome. And that’s just the taxes alone!”

Adesina said that the cutthroat rates explains the burden on air passenger, businesses, and ultimately the growth and development of the aviation sector.

“Aircraft departure fees alone in Africa are 30 per cent above the global average, while taxes, fees and charges are eight per cent higher. Given lower per capita incomes in Africa, high fares essentially tax the poor out of the air. We may have an open sky policy, but then end up with empty skies,” he warned.

The president said further that with more affordable rates and interconnectivity, the aviation Gross Domestic Product (GDP) contribution will increase by N397.8 billion ($1.3 billion) and create an additional 150,000 jobs across the continent.

Among the charges levied on airlines in Nigeria are: the Cargo Sales Charge, five per cent Value Added Tax (VAT), Passenger Service Charge of N1000 per ticket on local route, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges, Parking Charges and Terminal Navigational Charge. Others are Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity charges, Apron Pass, ODC, Registration Fee, Service Recovery Charge, Processing Fee, Avio Bridge, Aircraft Registration and Processing Fee.

The airlines also pay Toll Gate Fee, VIP Lounge, Trolley Service, Clearance Fee, Check-In Counter Charge, Courier/Tarmac/Pre-Release charges, Import Charge (Dom), Export Charge (Dom), Import Royalty, Export Royalty, Ports Charge, Exports Charge, Transhipment, and Concession Fee.

Together, these charges eat deep into earnings leaving the airlines with less than N10, 000 on a passenger ticket sold at an average price of N30, 000.

Chief Executive Officer (CEO) of Air Peace, Allen Onyema, could not agree less with the AfDB on how excessive charges are “killing” the sector, especially describing it as “wicked”.

Onyema said all over the world businesses are given the leeway to grow, but it is otherwise in Nigeria, where bureaucracy of the civil service is a stumbling block.

The CEO, who is also a member of the task force set up to look into multiple taxation in the aviation sector, said discussions are ongoing, but still a long way to go given the shades of interests involved.