Nigerian domestic air travel faces a severe threat of unprecedented fare hikes, potentially pushing ticket prices beyond ₦1 million, following the introduction of new tax legislation. Allen Onyema, Chairman and Chief Executive Officer of Air Peace, has issued a stark warning that these policies could force airlines out of business within months, triggering a wider economic crisis impacting passengers, financial institutions, and the nation’s economy.
Speaking recently, Mr. Onyema articulated the immense burden on Nigerian airlines, which he claims are struggling under excessive taxes, levies, and charges. He refuted the public perception of airlines as profiteers, explaining that a significant portion of ticket revenue is absorbed by statutory deductions, leaving operators with a mere fraction of the actual passenger payment. For instance, he cited an example where only approximately ₦81,000 reaches the airline from a ₦350,000 ticket.
Onyema particularly criticised what he described as multiple and overlapping charges, including a mandatory five percent deduction on every ticket sold, earmarked solely for the Nigerian Civil Aviation Authority (NCA). He argued that such revenue-generating levies contravene international aviation standards set by the International Civil Aviation Organisation (ICAO), which advocates for cost recovery models where charges align with services rendered to airlines, rather than serving as government revenue streams.
He recalled that the 2020 tax law had provided crucial relief to the sector by eliminating customs duties and Value Added Tax (VAT) on imported aircraft, spare parts, engines, and ticket fares. Despite these concessions, airlines continued to contend with numerous other charges across the country. However, the new tax regime reportedly reverses these vital provisions, reintroducing these burdens on operators.
Under the new regulations, importing an aircraft valued at $80 million would now incur a 7.5 percent VAT, with similar taxes applied to spare parts. Mr. Onyema highlighted that this renewed taxation, combined with the high cost of borrowing funds from banks—currently ranging between 30 and 35 percent—renders airline operations unsustainable. This financial pressure, he asserted, will inevitably be passed on to consumers.
The Air Peace chairman projected an unprecedented surge in domestic fares if the new policy is fully implemented, warning that Nigerian airlines could begin to collapse within three months. Such a scenario would not only devastate the aviation sector but also inflict substantial losses on Nigerian banks that have provided significant financing for aircraft acquisitions, creating a ripple effect across the financial industry.
The Airline Operators of Nigeria (AON), representing the nation’s carriers, has reportedly engaged with government authorities, including the National Assembly and the tax reform committee, to voice their concerns. Onyema indicated that lawmakers and consultants expressed surprise at the extent of the financial strain on airlines and acknowledged the potential risks to the national economy, suggesting some understanding of the industry’s plight.
AON is advocating for a return to the provisions of the 2020 Act, specifically urging the removal of VAT on ticket fares, imported aircraft, and spare parts. Onyema underscored aviation’s critical role as a catalyst for economic growth and national integration, asserting that governments globally typically support their airline industries. He expressed confidence in President Bola Tinubu’s business acumen and his administration’s willingness to listen to industry concerns, hoping for a swift intervention to amend the contentious law.
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