Chinedu Eze posits that the taxes, costs and tariffs imposed on airline operators by the federal authorities and its companies are outrageous, and accountable for the frequent failure of Nigerian airways.
There have been factors and counterpoints why Nigerian airways have quick life span. In addition to Aero Contractors, which was based in 1959 as oil and fuel shuttle service airline, there has not been any airline that has existed for 30 years in addition to Nigeria Airways Restricted (NAL), which was liquidated in 2003, however in different international locations, airways rejoice their 75 years anniversary.
Most of the operators who spoke to THISDAY said that in lots of different international locations, startup airways are given tax vacation however in Nigerian you begin paying costs throughout demonstration flights to acquire your Air Operator Certificates. There is no such thing as a respiration area and people taxes constrict airline funds and erode their capability to make revenue, therefore the quick life span.
Root explanation for failures
The President and CEO of Topbrass Aviation Restricted and key member of Airline Operators of Nigeria (AON), Roland Iyayi, gave a prolonged rationalization on the taxes paid by airways and the way they’ve affected their operation and survival. He stated that the difficulty of taxes, charges and costs and their opposed impacts have for thus lengthy been both ignored or missed within the aviation trade.
In response to him, regardless of the a number of failures of many airways previously many years, “our desk consultants have all the time maintained that these airways have been affected by the so-called ‘one-man possession syndrome’, lack of correct company governance, lack of requisite experience, unsuitable forms of plane, and many others. However nobody ever mentions the opposed impacts all of the obnoxious insurance policies and unilaterally imposed taxes, charges and costs have on the financial wellbeing of home airways.”
He stated that even worse, is the deal with elevated income era by all the federal government companies within the sector, with out commensurate worth or high quality of companies and fully at variance with their institution goal of being not-for-profit, including that each home airline firm within the nation is uncovered to a complete of 13.5% in taxes together with 5% ticket (constitution/cargo) gross sales cost, 7.5% worth added tax (VAT), 1% improvement tax, even earlier than the relevant company taxes, PAYE, pension scheme and others.
“In the meantime, each single flight is in flip uncovered to different charges and costs similar to flight clearance, navigation, parking or touchdown, and many others. Different personnel and gear particular costs similar to licensing, coaching, plane certifications, insurance coverage, and many others., are additionally relevant. Then we think about the operational bills together with gasoline, upkeep, depreciation and others. When all these are aggregated, we find yourself with taxes at about 32.7% of home airways’ gross revenues.
“It’s instructive to notice that the world common of airline profitability is between 1.5 – 2.5% for main carriers with measurement and scope. Boeing determines that the consequences of measurement and scope kicks into an airline’s operations when it operates a single fleet of a minimal of fifty plane. But, right here in Nigeria, our desk consultants hold forth on how an airline needs to be run profitably, even after they have by no means established or labored in a single of their total careers. When arguments are proffered to justify a number of the obnoxious insurance policies and tax regimes, it’s usually stated as an illustration, that the 5% TSC is paid by the passengers.
“Significantly? Who gives the capability for the passengers? Authorities or non-public airways? Whose loss is it when seats are flown empty, contemplating that these are perishable? Is demand suppressed by a rise in ticket value or not? Why are ticket costs not unbundled on this nation?”
Asphyxiating Rotary Wing in Aviation
Iyayi stated that having efficiently decimated the expansion potential of fastened wing airline operations within the nation, the main target has now shifted to the rotary wing plane for the ultimate stage to “be set for the demise of the home trade.”
Specialists have confirmed that over 90% of helicopter operations in Nigeria has to do with oil and fuel companies and if these companies are disrupted they may considerably have an effect on crude and fuel manufacturing.
“The Honourable Minister by fiat, despatched out an undated or referenced letter to helicopter operators within the nation, mandating that they henceforth pay ‘Touchdown Levy’ to the coffers of a non-public firm with no infrastructure for such, however to extend income era. The previous administration instructed the trade that it has put in the multilateration surveillance programs within the Niger Delta underneath the purview of NAMA (Nigerian Airspace Administration Company) for the aim. What has occurred? It’s pertinent for some inquiries to be answered right here: What’s the Touchdown Levy for and does it substitute the trade customary touchdown payment? What companies are being supplied at the moment and never paid for by helicopters? For the avoidance of doubt and opposite to the Minister’s assertion on nationwide TV, helicopter operations are absolutely regulated in Nigeria. From licensing to helideck approvals to flight plans and touchdown charges. This Touchdown Levy is an arbitrary cost that’s not doused in actuality and has an opportunity of crippling the entire trade if not fully cancelled,” he stated.
Iyayi additionally gave instance and of a typical helicopter operation, saying, “Escravos is the operational base for Chevron and it hosts a couple of of their contracted helicopters. The only Bell 407 or gentle twin Bell 427 helicopter does a mean of 70 landings per day. So, at $300 per touchdown, it involves $21,000 per plane per day. There are often 4-6 contracted plane at any time. So, if we assume 5 helicopters as a mean, that may quantity to a complete of about $105,000 per day for the 5 plane. If we then assume a 25-day month, that may quantity to a gross incomes of $2,625,000.00 as Touchdown Levy monthly, just for the Chevron Escravos operations.
“In the meantime, Chevron buildings its contracts with operators alongside the traces of a Month-to-month Standing Cost (MSC), paid to the operator month-to-month in arrears even when no flights are performed, and an Hourly Cost (HC) for when precise flights are performed. The contract price to Chevron for these 5 helicopters is roughly $1.75m monthly. So, in essence, the proposed Touchdown Levy prices greater than the service that supposedly generates the fees. How does this make any sense? Moreover, the manned helidecks and touchdown websites within the nation are licensed by the Nigerian Civil Aviation Authority (NCAA), with annual charges ranging within the thousands and thousands of naira paid every year to the NCAA to take care of certification,” he stated.
Present costs
The President of Topbrass Aviation Restricted additionally noticed that the helideck/radio/fireplace preventing crews for the helideck are additionally licensed with totally different charges payable to the NCAA.
“How do you then cost for working to a location you’ve licensed and bear no price of sustaining? Every touchdown at these areas are paid as per flight plan costs to NAMA. Clearly from the foregoing, it’s evident that the intention right here is to bleed home airways and helicopter operators to oblivion. The Honourable Minister needs to be knowledgeable that having a KPI targeted on growing authorities IGR is at variance with the target of the institution Acts and inimical to the expansion of the home trade.
“Paradoxically, the elevated income drive the Honourable Minister so longs for might be higher achieved via a holistic restructuring of the tax regime of the trade, by decreasing, simplifying and consolidating identical to extend the touring inhabitants by air. The rationale apparently is that the oil corporations would pay for the introduction of this new “Touchdown Levy”. Whoever the sensible Alec is, who thinks that multinational companies will merely improve their prices simply due to a say so is extremely delusional,” he stated.
Iyayi additionally defined that multinational oil companies work inside a structured framework to a price range and when prices improve abominably, a easy cost-benefit evaluation is all they should pull the plug, and so they often do with out recourse or regret, including that with the unfolding saga, “we should always prep for an enormous layoff quickly within the sector.”
THISDAY additionally learnt that oil and fuel corporations, which didn’t see the justification of extra levy on helicopter operators that present companies to them, have indicated their help for the operators, saying that even when it might cease oil and fuel manufacturing for few days; they might help no matter resolution the helicopter corporations might take to withstand their exploitation via that levy.
Rationale for the $300 levy
The Managing Director and CEO of Aero Contractors, Captain Ado Sanusi, has questioned the rationale behind the levy, taking cognizance that the helicopter operators have been paying their compulsory taxes and costs of their operation.
“My place is evident, you don’t cost for companies you don’t render. They are saying every touchdown on the platform it’s important to pay $300. Who constructed the platforms? FAAN (Federal Airports Authority of Nigeria) has no enter or contribution in constructing the platform. So what’s Naebi Dynamics offering? What are the companies of Naebi Dynamics? They’re offering no companies. If they’re offering no companies for the helidecks, then why would they cost $300? What’s the foundation of charging $300? I nonetheless don’t perceive why they might cost for touchdown on the platform or is it since you wish to tax? Why don’t you go forward and say for every barrel that we promote you wish to take $200. For doing nothing, why don’t you are taking it from every barrel?”
Sanusi identified the affect of the fees and stated, “For me in aviation it doesn’t make sense to cost for companies you didn’t present. What would be the affect, allow us to say the Federal Authorities agrees and retains the cost, it means the price of manufacturing of 1 barrel of crude oil will improve. So, we’re taking pictures ourselves within the foot on the finish of the day as a result of nobody would wish to soak up the associated fee, it might go to the plenty.
“Price of petrol, kerosene, jet A1, grease will improve as a result of the operators will switch it to the oil and fuel corporations who in flip will switch it to the price of drilling the barrel of crude. You aren’t serving to the economic system by doing that,” he stated.
The Aero boss additionally remarked that the operators are already paying taxes which they know why they exist, opposite to Naebi Dynamics cost.
“Bear in mind, this plane when it’s due for C verify the operator pays to NCAA. When the pilots are due for simulator refresher and so they need to renew their licence, the operators pays NCAA. The operator pays for radio licence within the helicopter cockpit, the operator pays all NAMA costs, the second you file a flight plan. So, what added worth have Naebi Dynamics placed on the companies NAMA or NCAA is offering? I’m completely towards charging for one thing you haven’t supplied for. Naturally, within the civilised surroundings, when you find yourself growing the tax in aviation you sensitise the operators forward of time, you inform them the rationale. You inform them what you wish to use the cash for,” he stated.
Assembly the Minister
An trade insider who additionally operates helicopter firm, instructed THISDAY that the operators have been ready for the Minister to make clear what he supposed to do “as a result of the memo that has been circulated has no date and I’ve by no means seen any official doc that got here out from the federal government on the difficulty. So, we’re ready to debate that with the Minister. Till then, we’ve got nothing to say. We don’t know what the levy is; it isn’t documented or gazzetted in anyway. All of the helicopter corporations are absolutely regulated by the NCAA and all the things we do, we pay for. Anytime we take off or land, there’s a cost with NAMA, NCAA, FAAN.
We’re ready to debate this with the Minister to know what it’s all about. It has no provision underneath the legislation and we don’t know the place it’s coming from.”
Official documentation
The operator stated that the discover in regards to the levy that has been circulated as an official letter didn’t seem like one thing coming from the workplace of the Minister as a result of it was not dated and signed because it ought to.
“So, we will’t quote the letter. We don’t recognsie NAEBi as a result of we don’t know who the particular person is. We cope with NCAA, FAAN, NAMA and the Ministry of Aviation. We don’t know some other organisation,” he stated.
Impact on operation
On the impact of the levy on helicopter operation, he stated, “It’s apparent this levy can’t stand as a result of it stands to kill aviation trade in Nigeria. There is no such thing as a foundation for it and we will’t even ponder it. If the federal government desires to develop the trade in line with their mantra, that is fully the other. It isn’t executed anyplace on the earth. There is no such thing as a foundation for it. The whole lot we do now’s paid for.
“The 2022 Nigeria Civil Aviation Laws, which was launched final 12 months, elevated a few of our charges by 1,000 per cent. What used to go for N300,000 is now N3.6m. Certificates of Airworthiness (CoA) was N300,000 and it’s now N3.6m. likewise all the fees. This was executed final 12 months.
“And we’re being requested to pay one other levy. I don’t suppose the federal government has the total reality. We’re able to dialogue with the federal government to indicate that we don’t know the place it’s coming from. How can we pay for companies that aren’t supplied for? This could’t even stand. We belief the Minister would give us the viewers and he would hearken to good reasoning,” he stated.
It’s hoped that the Ministry of Aviation and Aerospace Improvement will make out time and dialogue with the operators as a result of not doing so might result in the disruption of oil and fuel operations in Nigeria.
