The new policy by the Federal Government to tax First/Business Class passengers could do a calculable damage to air travel in Nigeria. WOLE SHADARE writes
The Federal Government’s decision to levy Business and First Class travellers, otherwise known as luxury tax did not sit down well with travellers. These are coming at a time this class of travellers are complaining that air fares are inexplicably expensive.
Whether it seems timely or a little too late, Nigeria seems to be keen on measures to make the “rich” pay more and therefore address redistribution of wealth through taxation of luxury items.
Generally, luxury tax is a tax on luxury goods and services i.e. goods and services that are not essential and consumed by only a niche.
It could be implemented through a sales tax system, value added tax system, or customs duty system of taxation. It typically affects the wealthy as opposed to the vast majority of the populace because the wealthy are the most likely to purchase luxury items.
In recent times, the Nigerian Government has been showing interest in this form of taxation as a response to the declining revenues from oil and to deal with social imbalance.
In November 2014, the past administration announced plans to introduce luxury taxes in the form of surcharges on items such as private jets, luxury yachts, luxury cars, business class/first class tickets on airlines but that never took place. The one that was seriously condemned was one introduced and forced down the neck of operators by former Minister of Aviation, Stella Oduah on operators of private jets to pay more.
The media and stakeholders fought against it, describing as fraud and one that may not be accounted for going by the desperation of the administration to mop up funds for government.
This is no doubt this could be a bad policy of the government considering the catalytic effect it will have on air travel. Rather than impose new taxes, they should be thinking of reducing taxes in aviation. It is highly uncalled for. They should be talking about review of the national policy; otherwise the industry will be destroyed. That would have adverse effect on Nigeria’s economy.
Implication for aviation
Another implication of this according to some experts is that Business and First Class passengers would no longer be able to afford air travel; a situation that would help to shrink that category of travellers and further lead to them taking alternative option, which is to go to Ghana or Lome, Togo where the difference in ticket is humongous.
There are too many taxes passed to the consumers by different bodies of the government. It’s not good. You are more or less saying that it’s a sin for you to want to live in comfort or fly in comfort.
In a survey conducted by our correspondent in 2013, fare disparity to London of the same equidistance on First Class of British Airways from Abuja, Nigeria, to London, Heathrow Airport pay $9,548.25 while another passenger travelling from Ghana on the same First Class, same plane to London Heathrow Airport will pay $4,970.55. With depreciation of Naira, the fare could be as high as $12, 000 now.
That is enormous. A little increase or tax on it would do a calculable damage to air travel. One cannot however, blame the carrier or any other for the outrageous fares on Nigerian routes because of the principle of demand and supply.
Experts’ divergent views
Capt. John Ojikutu (rtd), former Commandant of the Murtala Muhammed International Airport (MMIA), Lagos in an interview with our correspondent, said that this would amount to double taxation on the flying public.
Ojikutu argued that the first and business class passengers are already paying Value Added Tax (VAT) and Ticket Sales Charge (TSC) to the Nigerian Civil Aviation Authority (NCAA), which are already imbedded in their air tickets.
He said: “What happens to the VAT the passengers is paying? There was a time the government came out with something of such in the past where they said they would commence tax regime on those flying charter jets. Are they going to collect another tax different from VAT from the passengers or are they going to convert the VAT to tax?
“I can’t understand this. It’s going to be double taxation on them because they are already pay tax through VAT. For every passenger on hire and reward, they pay VAT on whatever amount of money they pay. Also, there is another 5 per cent Ticket Sales Charge (TSC) NCAA is collecting from the passengers through the airlines.
“If the government wants to look for money, they should focus more on people flying charter flights. They bring in aircraft to the country and they are not paying customs duties because they are not registered in Nigeria. Let them go round those who have private aircraft and have failed to register them. Those are the people bringing in between $5 to $20 million aircraft. That is where they can get money and not from passengers flying the hire and reward category and are already paying tax.”
Also, Capt. Dele Ore, former President of Aviation Round Table (ART), described the policy as unhealthy for the country’s aviation industry.
He maintained that the flying public is already over-burdened by multiple taxes and charges, stressing that if the government went ahead with the policy, which would further drive away passengers from the sector.
But, Mr. Olumide Ohunayo, the Director, Research, Zenith Travels, said that the government was in order in the planned enforcement of the new tax regime on such categories of passengers.
In an email address to our correspondent, Ohunayo insisted that the tax was long overdue on such classes of passengers.
He said that such tax, which he described as luxury, should also be imposed on non-scheduled operators in the country, hoping that its introduction would affect demand and supply.
He said: “This tax has been parroted for some time now without implementation. I will support it and hopefully it will affect demand and drive price down on our international routes.
“The prices in this class are uncompetitive and often used as the barometer for benchmarking the general fares.”
Airfare taxes, despite their name, are not collected by airlines, airports or any industry within the aviation business but rather by governments. Each government gives different purposes to their taxes, some of which are collected to reinvest in security, infrastructure, and passenger service among others.
AIS authorisation: All motion, no movement
Since 1998, it has been more of rhetorics than actualisation of yet-to-be-completed Aeronautical Information Service (AIS) automation. WOLE SHADARE writes that the project may end up as another white elephant project
Today, we live in a world in constant motion where time and information are becoming more precious. No one wants to lose a minute at doing nothing. It is by integrating this reality that the International Civil Aviation Organisation (ICAO) is developing daily, the critical role of AIS to meet global challenges.
The objective of the AIS is to ensure the flow of information necessary for the safety, regularity and efficiency of international air navigation. When completed, it will enhance air to ground and ground to ground information and boost interconnectivity between aircraft and air traffic controllers.
The AIS is installed in 11 locations and is planned to go on stream at the end of the year but would connect every part of the country by the end of 2017.
To achieve success, all the key agencies or data originators including the Nigerian Civil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), Nigerian Meteorological Agency (NIMET), Accident Investigation Bureau (AIB), Nigerian College of Aviation Technology (NCAT), National Emergency Management Agency (NEMA), Nigerian Air Force, etc would need to enhance their data collation, origination, processing, storage and exchange system.
Other deliverables, according to the NAMA boss, would include the enhancement of e-NOTAM, e-Flight Planning, e-AIP, e-TOD, e-Charts, e-Flight briefing and also boost capacity for voice and data communication for both air to ground and ground to ground communication. ICAO Annex 15 states that the AIS shall use automated pre-flight information systems to specify that pre-flight information must be made available at each aerodrome /or heliport normally used for international operations.
This includes all aerodromes/ or heliports designated for regular use by international commercial air transport as listed in the relevant ICAO regional plans and any aerodromes/ or heliports serving as alternates to these regular aerodromes/heliports.
The greatest challenge now lie with the NAMA, the NCAA, aviation institutions especially, the NCAT to accelerate the rate of AIS development to keep abreast of the new requirement arising from global demands as Nigeria cannot afford to continue to queue behind surrounding smaller African countries.
Nigeria has over the years remained stagnant with the automation of AIS. While Nigeria has remained stuck in the same position, many have or are moving towards Aeronautical Information Management (AIM).
The aeronautical information/data based on paper documentation and telex-based text messages cannot satisfy anymore the requirements of the ATM integrated and interoperable system and therefore the AIS is required to evolve from the paper product-centric service to the data-centric aeronautical information management (AIM) with a different method of information provision and management.
For that purpose, ICAO has developed a roadmap to reflect the importance of the evolution and to address the required changes and is being referred to as the transition from AIS to AIM.
The roadmap identifies the major milestones recommended for a uniform evolution across all regions of the world, the specific steps that need to be achieved and timelines for implementation.
The transition to AIM will not involve many changes in terms of the scope of information to be distributed. The major change will be the increased emphasis on data distribution, which should place the future AIM in a position to better serve airspace users and ATM in terms of their information management requirements.
It would be recalled that the global aviation regulatory body, ICAO had since 1998 sensitised all contracting state on the need for the services of AIS to be automated. Ever since 1998 in Nigeria, it has been more of hearing and reading on the pages of newspapers of AIS automation and it yet to be completed.
In the last five years, a lot of progress had been made in this regard. Before now, fund had been the recurrent impediment of this project. However, since 2016, the story has changed. Immediate past President of Aeronautical Information Management Association of Nigeria (AIMAN), Mr. Shittu Babatunde, stated at the just concluded delegate conference/World AIS Day Celebration held in Ibadan, Oyo State last weekend that he was at a seminar in 2015 where he said they were told not to expect the completion of the project even in 2017.
His words, “That has come to pass. At the user’s end of AIS nationwide, the effect of the project is yet to be seen in our day-to-day operations. While we appreciate the progress so far made by the Ministry, NCAA and NAMA management in this regard, I appeal to once again the Federal Government to see that this project does not become an elephant project”. Not a few are impressed. The international world is not going to wait for the country.
The world is now transiting to System Wide Information Management (swim). November 2015 was the deadline for contracting states to implement Electronic Terrain and Obstacle Data (ETOD), which is far more expensive than the automation and Nigeria is yet to start this.
A must-do for NAMA
Managing Director of NAMA, Capt. Fola Akinkuotu reiterated that the agency is aware of the critical deliverables of the Aeronautical Information Management (AIM) project such as the enhancement of e-NOTAM, eFlight Planning, e-AIP, e-TOD, e-Charts, e-Flight briefing and so on.
He said given that the digitalisation represents migration to a dynamic data-oriented aeronautical information management system that facilitates the real-time exchange of aeronautical information in an accurate and standardised format from anywhere to everywhere globally, “the automation project is a must-do for NAMA.”
He said notwithstanding the scarce resources, NAMA would leave no stone unturned to ensure that the AIS Automation process remained on course and completed. The NAMA helmsman lauded staff of the AIS department for their diligence, hard work and dedication to duty.
AIS remain one of the most critical departments in the agency even though they are hardly given the prominence they deserve, because their job most often, is behind-the-scene. The absence of AIS in the system will bring about chaos in the entire civil aviation.
Tourism-transport summit garners support from aviation agencies
Aviation agencies have expressed commitment to participate in the Tourism Transport Summit/Expo being anchored by the Institute of Tourism Practitioners (ITP) for the Ministries of Transportation and Ministry of Information, Culture and Tourism.
Agencies such as Nigerian Civil Aviation Authority (NCAA), Nigerian Airspace Management Agency (NAMA), Nigerian Meteorological Agency,Nigerian College of Aviation Technology (NCAT), Zaria and the Accident Investigation Bureau (AIB) will participate in the summit with theme: ‘Tourism and Transportation: The Key Sectors for Sustainable Resilient Growth and Development’.
In a statement signed by the organizers of the event, Institute of Tourism Practitioners (ITP), the two-day summit is the first edition in a series to be organized annually and is scheduled to hold at the International Conference Centre (ICC), Abuja from 21st – 22nd May, 2018.
The statement highlighted that transportation and tourism is predicted to be one of the world’s highest growing sectors in the new century, creating more jobs and increasing the Gross Domestic Product (GDP) of most countries of the world.
The organizers stated that the Summit and Expo are created to build strong synergy and chart the way forward to grow and enhance the two sectors. Other Sub themes of the Summit that includes Potentialities of Developing Regional Inter-Connectivity in Transportation and Inter-Modal Connectivity, Traveler Safety and Security; Licensing Regulations and Oversight–Meeting the International Standards for Sustainable Development of the Transportation and Tourism Industries; and Building Capacity for Global Best Practices in the Tourism and Transportation Sectors.
Airlines jostle for Nigeria’s recovering domestic market
Many airlines have applied for operating licences, but majority fell by the way side even before they started, while others are at the verge of scaling the hurdles. WOLE SHADARE examines the projected over-capacity on the route if eventually the carriers get their Air Operator Certificate (AOC)
They came with the hope of getting the all-important AOC. The tedious process had made many of them to fall by the way side. That is the fate of over 26 prospective airlines that were eyeing the domestic aviation market.
A total of 32 airlines made up of scheduled and non-scheduled operators are currently listed as holding AOC and are on the register of the Nigerian Civil Aviation Authority (NCAA) as at January 10, 2017 till date.
Airlines are categorised into scheduled and non-scheduled on the strength of the type of operations they carry out. A scheduled flight is a trip by airplane that has been planned for a certain time and date. Airlines sell tickets for scheduled flights to help travellers get from one destination to another.
The eight airlines that operate scheduled passenger operations are Aero Contractors, Arik, Overland Airways, Medview, Dana, Air Peace, AZMAN and First Nation Airways. A country’s civil aviation authority gets the power to issue AOC to an aircraft operator to allow it use aircraft for commercial purposes.
This requires the operator to have personnel, assets and system in place to ensure the safety of its employees and the general public.
The certificate lists the aircraft types and registrations to be used, for what purpose and in what area – specific airports or geographic region.
Meanwhile, two of the airlines, out of the 32, ceased to be regarded as airlines, owing to the expiration of their certificates.
Carriers with active AOC
The 30 other airlines with active AOC are Aero Contractors with AOC number CAN/ AOC/12-12/08 valid till January 1, 2019, Allied Air AAL/AOC, 07- 13/003 valid till July 30, 2017, Air Peace APL/A0C/09-14/001 valid till September 7, 2018, Arik Air RIK/AOC/07-10/01 valid till July 11, 2018, Associated Aviation ASS/ AOC/06-15/001 valid till May 31, 2017.
Azikel Air AZK/AOC/07-16/001, AZMAN Air AAS/AOC/05-14/002, Bristow Helicopters BHL/AOC/12- 14/002, Caverton Helicopters CH/ AOC/11-14/001, Dana Airlines DAN/ AOC/11-1808/01 and Dornier Aviation DAA/AOC/06-15/002.
Others are Executive Jet Services ELS/AOC/03-15/002, First Nation FNA/AOC/10-11/02, Gyro Air Limited GAL/AOC/10-16/001, HAK Air HAK/AOC/04-12/001, Izy Air IZY/AOC/12-15/001, Jed Air JED/ AOC/06-13/002 and King Airlines AAX/C/024.
Also included are Max Air MAX/ AOC/06-13/001, Medview Airline MVA/AOC/03-14/001, OAS OAS/ AOC/03/14/002. Others are Overland Airways OAL/AOC/03/14/001, Pan African Airlines PAN/AOC/12-14/001, Skybird Air SKYBIRD/AOC/04-13/08, Skyjet Aviation Services Limited SKL/AOC/12-12/07, Skypower Express Airways AAR/C/018 and West Link Airways WLA/AOC/02-11/002.
Also on the list are Nestoil Plc NOL/AOC/03-15/002, OMNI BLU Aviation Limited OBA/AOC/12-15/002 and Top Brass Aviation Limited TBA/ AOC/11-11/03.
Spokesman for NCAA, Mr. Sam Adurogboye, disclosed that there were five phases an airline underwent before completing the certification process and many airlines faltered on the way.
There is the pre-application phase – when the airline makes enquiry about the processes, followed by the document compliance phase, which involves a certification team reviewing applicant’s documents for compliance acceptance/approval.
The others are AOC process, also called demonstration and inspection phase, which involves evaluation by a certification team and applicant’s demonstration of compliance evaluation of management effectiveness, inspection of station(s) facilities, flight operations, maintenance and records.
The next is called certification phase, which allows the intending operator for approval of AOC and Operation Specification with coordination with Director for Safety Oversight and DG NCAA.
While some have fallen by the wayside, others are forging ahead in processing their AOC. There are fears that there would be over capacity on a lean domestic air travel market if some of them succeed in seeing through the process that could land them the licence to operate. They would be jostling for a small air market of about 10 million passengers annually.
Many of the routes are very unviable except for the triangular routes of Lagos-Abuja and Port Harcourt and to a large extent, Enugu.
A leading airline official said it doesn’t add up in situations where airlines in a bid to woo passengers will have to charge airfares in naira that are as low as N18, 000 to N22, 000 on routes where you fly for almost 45-50minites.
“That’s already like running at a loss. In the United States, no airline does a 50 -60 minutes flight and charges $60 (about N25,000), which is what the airlines are doing right now in Nigeria,” he added.
Fearing a public backlash should they come out openly to announce increase in air fares, most airlines have opted to such subtle measures as raising fares on competitive routes (such as the Lagos, Port Harcourt and Abuja) or those routes that they enjoy a sort of monopoly, while lowering fares on those with fewer number of passengers.
“We do aircraft maintenances in dollars, buy spares in dollars, pay for insurance in dollars, and even buy fuel in dollars. What the CBN supplies is still not sufficient for us. Most of us still get dollars at the parallel market. And by the time we are converting earnings in naira into the dollars, it becomes very obvious in simple economics that the current fares have to go up by more than 60 per cent if airlines must continue to fly and be profitable,” said an airline’s spokesman.
“To be honest, the cheapest or most realistic fare Nigerians should be paying on any route within the country should be N40, 000,” he added.
Former Commandant, Murtala Muhammed Airport, Group Capt. John Ojikutu (Rtd) said, “Let us be honest, the Nigerian domestic airlines cannot be selling passenger flight tickets at N25,000 to Abuja if the dollar is selling at N360 to $1, the same price it was selling two years ago when dollar was at N200 to $1.”
“The present cost of aviation fuel, the high operational cost cannot justify the air fare of N25,000 for an hour flight anywhere in Nigeria. The high operational cost also cannot be sustained except the airlines short change service providers and the supporting agencies or there are inflows of cheap monies coming from sources to sustain their operations”.
New entrants would be worst hit because the current ticket prices are not in sync or responsive to current realities and this is due to unhealthy price wars and pursuit of market dominance at the domestic side of airline business.
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