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.
Threat amid runway risks
With every tragic high profile crash, the general public’s feeling about airline safety takes a punch. WOLE SHADARE writes
The recent incursion of Akure airport runway by cows that prevented Air Peace aircraft to delay landing for about 20 minutes has again brought to the fore the need to improve aviation safety through ensuring that airport runways are clear of obstruction.
A runway incursion is an incident where an unauthorized aircraft, vehicle or person is on a runway. This adversely affects runway safety, as it creates the risk that an airplane taking off or landing will collide with the object. It is defined by the International Civil Aviation Organisation (ICAO) as any occurrence at an aerodrome involving the incorrect presence of an aircraft, vehicles or persons on the protected area of a surface designated for the landing and take-off of aircraft.
While aviation has been getting safer of late, runway incursions by aircraft or vehicles remain a weak spot. After all, during each flight, the passengers literally put their lives in the hands of complete strangers.
Although general aviation accidents have been decreasing over the past few years, incursions with all dangers attached to them have been increasing at an alarming rate. It is merely a matter of time for these incursions to become tragic accidents. Last week Saturday, scores of cattle made incursion into the runway of the Akure Airport, in Ondo State, preventing an Air Peace flight, which left Lagos for Akure from landing immediately until they were dispersed by security men.
March 8, 2011, the Hawker 850 aircraft carrying the then Vice-Presidential candidate of ACN, Mr. Fola Adeola, experienced scenario of runway incursion by goats and sheep at Bauchi airport.
Sources at the airport said the incident, which has become a regular feature at the airport premises occurred around 12:00 am, causing initial disturbance to the airline and passengers, forcing the former to hover mid-air for some minutes.
“The herdsmen foraged into the runaway causing some disturbance and preventing the aircraft from landing around 11:30am. The incident lasted for about 10 minutes until Aviation Security personnel, (AvSec), arrested the situation,” a source at the airport told New Telegraph.
Rising to the occasion
The management Air Peace said that flight P4 7002 from Lagos had to delay landing into Akure Airport when the pilot-in-command sighted cows on the runway at about 12.15pm. “On being alerted by control tower, aviation security personnel of the Federal Airports Authority of Nigeria (FAAN AVSEC) quickly intervened and cleared the runway. “The flight was eventually cleared to land after about seven minutes.
Our guests on board were all calm while the delay lasted. The aircraft departed for Lagos at about 11.06 with full escort from FAAN security personnel. Confirming the incident, Air Peace Corporate Communications Manager, Mr. Chris Iwarah said: “We confirm that flight P4 7002 from Lagos had to delay landing into Akure Airport today (Saturday) when the pilot-in-command sighted cows on the runway at about 12.15pm.
“On being alerted by control tower, aviation security personnel of the Federal Airports Authority of Nigeria (FAAN AVSEC) quickly intervened and cleared the runway.
“The flight was eventually cleared to land after about seven minutes. Our guests on board were all calm while the delay lasted. The aircraft departed for Lagos at about 1.06 with full escort from FAAN security personnel.”
Last week’s incident is reminiscent of what happened in 2005 when Air France plane, with 196 people on board, ploughed into the cows as it touched down at Port Harcourt.
No-one on board was hurt, but the collision left seven cows dead and the runway was soaked with their blood. The embarrassment led to the Minister of Aviation at that time, Mallam Isa Yuguda to summon airport officials to explain the security breach.
Runway incursions are today one of the major factors affecting flight safety. In India, there are numerous cases of small accidents involving runway incursions every year, with the potential always present for a major disaster, such as the Tenerife airport collision on March 27, 1977, when two Boeing 747 passenger aircraft collided on the runway of Los Rodeos Airport (now known as Tenerife North Airport) on the Spanish island of Tenerife.
A total of 583 passengers died in that incident, making it the deadliest accident in aviation history. Even if accidents are avoided, incursions often cause costly flight delays.
Animals on the Runway
Animals on the runway are a particularly pervasive problem at many airports in India. There are numerous examples. In 2005, an aircraft taking off from Pune International Airport ran over a stray animal, which resulted in a two-hour delay for flights.
In 2008, an Air India aircraft narrowly escaped accident when it hit an Indian blue bull during landing at Kanpur Airport in Uttar Pradesh. Also in 2008, a Kingfisher Airlines aircraft hit a stray dog on the runway at the HAL Bangalore International Airport, resulting in the aircraft’s landing gear collapsing.
The aircraft skidded off the runway and its nose collapsed; four passengers were injured. Maharashtra Chief Minister Prithviraj Chavan recently ordered an Airport Environmental Committee (AEC) enquiry into the recurring mishaps – hundreds every year – caused by stray animals on the runway at Babasaheb Ambedkar International Airport in Nagpur.
Perimeter absence at most airports
The absence of perimeter fences at most of the country’s airports has always posed a challenge to FAAN because of the huge capital outlay required in constructing perimeter fences, some of which are as long as 40 kilometres, across the 22 network of airports across the country. Some of the perimeter fence projects commenced in 2014 while the remaining ones were expected to be executed in 2015.
Bushes around the runways, particularly, airports that are not busy like the Akure, Ibadan, Jigawa and many others that were built by state governments but forced down the throats of FAAN, do not give full view of the perimeter, to allow both the control tower, FAAN Fire and Rescue observation posts and aviation security patrol teams have a sweeping view of the entire perimeter of an airport from their duty posts.
Static observation posts are yet to be erected at strategic locations within the perimeter fence of many of the airports to forestall premeditated and inadvertent unauthorized access to the airside.
What will really put the fear of flying into the hearts of passengers is when they personally experience an incident on the runway. Safety first is at the core of flight crew and air traffic control alike, still runway incidents and accidents keep occurring.
Gulfstream G500 Jet launches in Nigeria
The all-new Gulfstream G500 business jet made its Nigerian debut this week, with Gulfstream Aerospace Corporation’s senior executives visiting Nigeria to give current and potential customers an opportunity to experience first-hand the new aircraft’s cutting-edge technology, unparalleled comfort and superior craftsmanship.
The Gulfstream G500 business jet was on display for private viewing at the ExecuJet Terminal of the Murtala muhammed International Airport in Lagos on February 16 and 17. At a networking event attended by senior leaders from diverse sectors of the Nigerian economy, Commercial Counsellor Brent Omdahl, according to a statement, reaffirmed the strong economic ties between the United States and Nigeria.
“The U.S. Foreign Commercial Service continues to facilitate long term business relationships between companies from the United States and Nigeria. We are excited to welcome this stellar group from the Gulfstream Aerospace Corporation to share their experience and expertise with Nigerian business executives,” Omdahl said. Private aviation is a growing industry in Nigeria, which is home to more than 20 Gulfstream business aircraft, most of them large-cabin, long-range jets capable of connecting companies and business owners with their corporate interests around the globe.
The Gulfstream G500, for example, can fly 8,149 km at nine-tenths the speed of sound, easily carrying passengers from Lagos to London or Moscow. At Mach 0.85, the aircraft can travel 9,630 km, linking Lagos with Caracas or Mumbai.
Long road to national carrier
Anxiety mixed with uncertainty could best describe the slow pace of work to establish a national airline. WOLE SHADARE writes
Can Nigeria pull this through? Many are very desirous of a national airline for Nigeria but the slow speed of actualising the dream is beginning to dampen the spirit of many who thought by now, the issue of a national carrier would have been put to rest.
Just last weekend, Minister of State for Aviation, Hadi Sirika rekindled hope that in the next couple of months, “we should be closer to having a national airline. He noted that the country was very close to getting a national airline.”
Luthansa project flops
The Lufthansa saga seriously looked as if the entire project had collapsed before it even took off, leading to insinuations in some quarters that the government was not serious about one of the key things it promised to do in 2015.
Lufthansa Consortium’s contract that was expected to mid-wife a national carrier was terminated with the government explaining that the decision was taken in the best interest of the nation.
The minister alleged that the firm changed the term of contract it had with the government by demanding that aside asking for 75 per cent of N341 million upfront payments, which he said was not in line Nigeria’s procurement law, also alleged that the firm wanted the money to be converted to Euros, which was also not acceptable to them.
His words, “What transpired at the Federal Executive Council (FEC) meeting, which I explained very clearly is that we substituted Lufthansa Consulting as part of the consortium to provide transaction advisory services for the establishment of a national carrier.
“The reason is very simple and clear. We thought that Lufthansa Consortium is an arm of Lufthansa Airline Group and this may compromise the process. They might be interested party latter in the day of this procurement and this may compromise the system. We want it to be transparent, as fair and equitable as it should be.
“They wanted about 75 per cent to be paid of the sum ab nitio and this is not in line with procurement laws. The contract was in Naira N341million but they wanted to change it Euros and this was not acceptable to us. This was neither in our request for proposal. What we did was there were many in the consortium; we substituted them with another company that is even fair, that is no appendage to any other company that might be interested. So, they are more of a neutral company to take over the place of Lufthansa “, he added.
Although, Lufthansa Consortium is yet to speak on the matter, a source close to the firm said it has a reputation that would not want to be tarnished because of the way the Federal Government went about the whole bidding process which was less than transparent.
Many, who spoke to New Telegraph, said the failure of flag carriers in Nigeria has made the government to look inwards with a view to making air transport easier for the teeming Nigerian public who have been short-changed over the years with bad services, unreliable schedule and many other customer related problems.
Many flag carriers have collapsed over the years. Many do not know where to turn to. While the lamentation continues, foreign airlines have perfectly filled the void and providing seamless air travel needs to very mobile populace.
While airline collapses have become commonplace with Aero and Arik going under during the past few years, the loss of flag carriers is a frequent phenomenon.
For sure, we ‘ve seen high profile bankruptcies; Arik and Aero immediately come to mind. But in both cases, the government worked hard to get them rescued.
Both Rwanda and Zimbabwe are good examples of why small countries need their own airlines. Big nation such as Nigeria needs it more than ever before.
With not enough space on the tarmac for a host of home-grown competition, countries need their own airlines to stimulate trade, boost tourism and in many cases, assert their sovereignty.
Conventional wisdom suggests that states have no business running airlines. Indeed, the past few decades have seen most major economies sell their flag carriers to other airline groups or list them on the local bourse-often keeping minority stakes for sentimental purposes. The results have been mixed, at best.
An aviation consultant, who spoke on condition of anonymity, said he also believes there’s a need for the governments to offer essential services to their citizens. In the case of countries with small populations or lacking strategic hubs, this also means underwriting the national airline.
Consultants might argue that this is wholly unnecessary, as other airlines will swoop down to soak up demand. But there is considerably more at stake than just ensuring every flight boasts 80 per cent load factor. On a good day, a national airline is an embassy with wings-transporting culture, cuisine, commerce and goodwill around the world.
Ethiopian Airlines is a flying example of resourcefulness and ingenuity. A flag carrier that instils a sense of pride when its tail is spotted on the runway of a far-off land; when it brings home the winning team or when it flies out of to evacuate citizens stranded in a conflict or disaster zone.
In an increasing globalised world, smart governments recognise the importance of having their flags fluttering on as many routes as possible. It is a mileage that certainly hasn’t been lost on Singapore, whose government owns the highly respected Singapore Airlines, or Dubai, home of Emirates. In both cases, these small states have made their airlines part of their national identity and growth strategy.
As governments around the world continue to tighten their belts, they also have the to remember there are some things you simply have to protect such as education, national security, banks and infrastructure are fundamental. An airline to call your own is also useful to get your citizens around the world and bring in visitors to invest and marvel at your achievements.
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