New Tax Law Will Push Airfares To N1.7m, Air Peace Boss Warns

…Says Airlines Get Only N81,000 From N350,000 Ticket Sold

Air Peace Chairman and Chief Executive Officer, Allen Onyema, has warned that Nigeria’s domestic aviation industry is facing a looming crisis as newly introduced tax laws threaten to push airfares beyond N1m and force airlines out of business.

Speaking in an interview on Sunday, Onyema said that unless urgent steps are taken to reverse the policy, the industry could begin to collapse within months, with far-reaching consequences for passengers, financial institutions, and the wider economy.

He said Nigerian airlines are burdened by excessive taxation, levies, and statutory charges, arguing that operators are wrongly portrayed as profiteers despite retaining only a small portion of ticket revenue.

“Taxes, levies, and all manner of charges heavily overburden the Nigerian airlines. Just take a ticket of about N350,000. What comes to the airlines is about N81,000. And people, everybody’s talking about the airlines as if they’re making a kill. It’s not true.”

Onyema faulted what he described as multiple, overlapping deductions imposed on airlines, including a mandatory five percent charge on every ticket sold.

“We are suffering multiple taxation, multiple charges. For example, the NCAA, five percent for every ticket, is mandatory. That is to NCAA alone. There are so many other charges.”

According to him, the charges contradict international aviation standards and ultimately reduce passenger demand.

“ICAO, the International Civil Aviation Organisation, says that you are not supposed to go into revenue-generating for the government. What you do is cost recovery.”

He explained that global aviation best practice supports cost recovery based on services rendered, not revenue generation.

“That is, you charge according to the cost of the services you render to the airlines. Who are the ones suffering? The airlines. And that’s why the airlines are not growing.”

Onyema recalled that the 2020 tax law provided major relief to the aviation sector by removing customs duties and VAT on imported aircraft, spare parts, engines, and ticket fares.

“Now, the tax law of 2020 removed customs duties on imported aircraft and imported aircraft spares and engines, removed VAT on imported aircraft and other spare parts, and removed VAT on ticket fares. That is the 2020 Act.”

He said that despite those concessions, airlines were still grappling with several other charges nationwide, adding that the new tax law has now reversed the gains.

“Even then, airlines are still suffering from so many other multiple charges all over the country.”
“Now, the new tax law has brought those things back. All of them.”

Onyema explained that aircraft and spare parts importation would now attract 7.5 percent VAT, significantly increasing operating costs.

“There’s VAT now on the importation of aircraft. So if you buy an aircraft for $80m, you are supposed to pay 7.5 percent of $80m.

He added that the combination of renewed taxation and high borrowing costs makes airline operations unsustainable.

“Funds borrowed from the bank are 30–35percent So you bring in spare parts, you pay 7.5 percent on your spare parts. Ticket fares will hit $1.7mn soon. At 35 per cent we are choking. You don’t do that.”

Warning that the burden would be passed on to passengers, Onyema predicted unprecedented increases in domestic airfares if the policy is fully implemented.

“Because when you take 5 percent from what we charge, it reduces the demand. With this new tax regime? Yes. From January? From January. With 7.5 percent on ticket fares, ticket fares will hit N1.7m soon.”

“If we implement that tax reform, Nigerian airlines will go down in three months, At the end of the day, economic class tickets will go to about N1.7mn if it happens.”

He said airline operators, under the Airline Operators of Nigeria (AON), have repeatedly submitted their concerns to government authorities, including the National Assembly and the tax reform committee.

“We submitted, Nobody listened to us. In fact, to be honest with you, the AON, the operators, airline operators, I led hem, we went to the National Assembly. We addressed them on this issue and they saw reasons with us. They were surprised by the kind of facts we’re bringing out.”

According to Onyema, lawmakers and government consultants acknowledged the risks posed by the policy after engaging with operators.

“We went to the National Assembly. We addressed them on this issue and they saw reasons with us. They were surprised by the kind of facts we’re bringing out. We went to the tax consultant, the government hired, the chairman of the task force, a fantastic gentleman. He gave us an audience. He’s going to look at it. He agreed with us. He was even worried.”

Describing aviation as a catalyst for economic growth and national integration, Onyema said the sector should not be treated as a revenue source.

“One thing I credit this regime for is that our president is a businessman and from what I know, he doesn’t want indigenous businesses to crumble. And when it comes to the airline business, it’s a peculiar one. Airlines all over the world are supported by governments, even private airlines. We’re not asking them to give us money, even though in other climes they are giving money.”

He urged the government to revert to the 2020 Aviation Act, which he said respected the peculiar nature of the industry.