N20bn Debt: Operators Insist NCAA Collect 5% Ticket Sales Charge from Travellers

Chinedu Eze

The Airline Operators of Nigeria (AON) has insisted that the Nigeria Civil Aviation Authority (NCAA) should henceforth device a way to collect its 5 per cent Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC) levied on passengers.

NCAA has indicated that it currently suffers fiscal incapacitation, including the inability to pay its over 1,500 workforce allowances and carry out essential projects because many of the airlines owe it accruals from these charges with debts rising to over N20 billion.

But AON said that in order to end the recurring impasse over the charges and put an end to airlines being indebted to the regulatory authority, the agency should put up a framework to collect the charges directly from the passengers.

The operators cited the action taken by the Federal Airports Authority of Nigeria (FAAN), which some years ago ended similar controversies with the airlines by collecting its Passenger Service Charge (PSC) directly from the passengers.

To make this possible, FAAN issues stickers to the airline which buys them upfront for their passengers; so, every boarding pass is attached PSC sticker and through that way FAAN collects is revenue from the travellers.

But reacting to the request of the airlines, the Director of Public Affairs and Consumer Protection, Michael Achimugu, told THISDAY in a telephone interview that it was possible that NCAA could device a means to collect the charges directly from passengers.

 However, he noted that currently the law stipulates that airlines should collect the charges on behalf of NCAA.

Achimugu indicated that NCAA could put up a system to collect the money directly from the airlines when the law is changed and emphasised that even if the authority would collect the charges directly from the passengers, the airlines ought to offset their debts first to the agency.

“Anything (collecting the charges directly from passengers) is possible in a situation like this. Protocols have the right to evolve, but this is in the Civil Aviation Act. Airlines will continue to collect the charges pending when the law is changed. The time to argue about cost recovery is not when the airlines still owe the agency. Everything is possible with the right discussion. So, with technology everything is possible but the law has to be amended before such change can take place,” he said.

Achimugu also suggested that discussions to reach a compromise may be going on, as the Minister of Aviation and Aerospace Development, Festus Keyamo, the Director General of NCAA, Captain Chris Najomo and the executive of AON had a closed-door meeting over the matter on Tuesday.

The airlines explained that before the sudden increase in the price of aviation fuel due to the war in the Middle East, they had arrangement with NCAA on the payment system but that increase in jet fuel prices multiplied their cost of operation, so they have to borrow to continue to provide service.

However, one of the operators and staunch member of AON told THISDAY that it was not the passengers that pay the 5 per cent ticket sales charge.

He said the money accrue from airlines revenue, explaining that it is deduction from airline’s ticket cost. According to him, five per cent is removed from the cost of ticket, not that a certain amount of money is attached to the ticket, which will make it a flat rate.

“The five per cent Ticket Sales Charge is depleting our capacity to charge passengers the right fares. The Nigeria Civil Aviation Authority must devise a way to collect the charges directly from passengers. The Federal Airports Authority of Nigeria (FAAN) collects their passenger service charge directly. We the airlines pay for their tickets in advance. We pay FAAN upfront.

We pay the aviation agencies all the financial commitments for the services they render to us. That is what is called cost recovery. We want to renew pilots and cabin crew license, we pay. We pay for inspection and all other services NCAA and other agencies rendered to us. In addition to that they still collect five per cent passenger service charge which is revenue generation different from cost recovery. This is not in tandem with ICAO recommendation and standard practices. Agencies are not supposed to be taxing airlines in addition to our obligatory payments for the service they render to us,” the operator said.

Industry insiders disclosed that it was from the revenue generation (charges) NCAA collects from the airlines that it used to pay up to $500 million to the federal government as remittances last year, noting that the International Civil Aviation Organisation (ICAO) frowns against government agencies such as NCAA generating revenue from the airlines.

“Airlines are currently not operating with profit; in fact, since the price of aviation fuel increased some of us have to borrow money to buy jet fuel. NCAA surreptitiously smuggled that five per cent TSC into Civil Aviation Act without collaborating with us.

“So, what this means is that NCAA is taking from your revenues without investing in your business. With the financial burden occasioned by the high cost of aviation fuel, I doubt whether any airline will be able to pay the accruals of five per cent PSC. In fact, all of us owe oil marketers. There is no airline that does not owe oil marketers,” another operator volunteered to THISDAY in a telephone interview.

THISDAY also learnt that one of the major airlines had borrowed N48 billion in seven weeks because of the high cost of aviation fuel.

 “We are borrowing at 30 per cent interest rate and we buy fuel at N2, 500 to N3, 300. Airlines are no more making money. Every airline in Nigeria owes marketers,” the source said.

“Government will have to review the five per cent PSC. It is either NCAA devices a framework to collect the money from passengers or it has a flat rate of charges as FAAN has done. The five per cent TSC is not money collected from passengers; it is part of the airlines revenue. We borrow money for operation at 30% interest rate but you collect five per cent of the cost of ticket. So, let them have flat rate charge and collect the money by themselves. FAAN is doing it; they can do it. We the airlines purchase the stickers from FAAN. We can also do it that way from NCAA. The money should be a flat rate,” the operator said.

Industry analyst and Managing Director of Flight and Logistic Solutions Limited, Amos Akpan, has pointed out that there is cost associated with collection, management, and transfer of per cent TSC and CSC by the airlines for NCAA, saying that the total amount is huge.

According to him, whether the airlines collect it on behalf of NCAA, or NCAA collects it, cost will be there.

“The question is who bears that cost? The answer to this question will shape decision on the next step for NCAA and the airlines on this subject. If NCAA collects direct, they will hire services and pay for the associated charges. If airlines continue to collect on their behalf, they will continue to pay financial managers and bank charges associated with it. Both parties cannot continue to ignore the key point and hope to reach a resolution on this matter,” he said, noting that the airlines ought to have brought out the matter earlier than now.

Aviation stakeholder and the Executive Secretary of Aviation Round Table (ART), Olu Fidel Ohunayo, explained to THIADAY that what the NCAA referred to as ‘outstanding charges’ relates solely to the 5 per cent Ticket Sales Charge (TSC), “a tax imposed by the NCAA on passengers for no services rendered to passengers and not in consonance with the dictates of international aviation. This is entirely different from regulatory service fees.”

Ohunayo said many airline operators maintained dedicated accounts from which the NCAA draws down its monthly remittances, until the force majeure caused by the Iran -Israel/USA conflict, that had put a lot of financial pressures on airlines worldwide. “This means that the debt built up after the outrageous spike in cost of the aviation fuel due to the war in Iran,” Ohunayo said.