AON Urges NASS To Scrap 5% TSC

The Airline Operators of Nigeria (AON) has called on the National Assembly to scrap the current 5% ticket, charter and cargo sales charge (TSC) altogether and replace it with a structure modelled on the passenger service charge (PSC) used by the Federal Airports Authority of Nigeria (FAAN), arguing that the existing percentage-based system is unfair to domestic carriers.

The association made its position known on Thursday at a public hearing on the proposed revision of the statutory sharing formula for the 5% TSC, held at the Federal House of Representatives. The AON was represented at the hearing by former Managing Director of the Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi.

Presenting the association’s position to the committee, the AON argued that a flat charge like that of FAAN’s PSC, would remove the distortions created by a percentage levy applied indiscriminately to airline earnings, and put operators on more equal footing regardless of route or ticket pricing. The AON also linked its call for reform to the sharp rise in fuel prices affecting airlines nationwide. It said domestic carriers have struggled to remit the 5% charge to the NCAA since March, managing to do so only by shifting toward charter flights rather than sustaining regular scheduled operations.

“The 5% service charge has outlived its usefulness. It has become a burden on domestic airlines. We have made a submission on this. We have been proactive. As the AON, we have actually produced a document addressing institutional reform for the entire funding policy of the industry, and we will resolve it. So, essentially, what I am here to say, in a nutshell, is this: there are issues for consideration.

“Beyond the 5% charge, the AON recommends a different model. Rather than charging a percentage, we recommend adopting a structure similar to the one FAAN uses for the passenger service charge, because that creates a level playing field. Right now, the 5% is charged on everything an airline earns. I’ll give an example: since March, we’ve experienced fuel shocks worldwide. The average fuel price increase elsewhere in the world was 60–80%, but in Nigeria it was 270%. Since March, domestic airlines have not been able to pay the 5% to the NCAA. We have managed to remit only because domestic airlines are now taking on charter flights to pick up loads rather than continuing scheduled flights. Essentially, ticket revenue is now going straight into fuel costs, fuel accounts for 40% of an airline’s operating costs,” he said.

The AON also raised concerns about how revenue collected by the Nigerian Civil Aviation Authority (NCAA) is being deployed. It noted that the NCAA collects fees on masts structures erected within the airspace, so that NAMA can produce low-level navigation charts. However, the association said the absence of such charts has left much of the country’s airspace underused, noting that helicopters in Nigeria currently cannot conduct low-level night flights.

According to the association, aircraft capable of flying 8 to 10 hours a day are being used for only about 6 hours because of inadequate infrastructure, a situation it said the NCAA’s practices have helped perpetuate. The AON further alleged that over the past 20 years, the NCAA has collected more than N10 billion from mast application fees and similar charges, funds it insisted should be reversed and properly accounted for.

He said: “The NCAA collects fees on masts, structures erected in the airspace. The reason a mast’s geolocation is required is so that NAMA can produce low-level navigation charts. As we speak, helicopters in this country cannot conduct what is called low-level flight at night, and most of our airspace, because we lack low-level navigation charts, can scarcely be used. So the optimization of aircraft assets by domestic airlines is significantly constrained, it’s important to acknowledge that we have operational limitations as the AON. Aircraft that could be flying 8 to 10 hours a day are used for only about 6 hours, because of inadequate infrastructure. So, as I said, this practice by the NCAA needs to be reversed. In fact, it is understood that over the last 20 years, the NCAA has collected over N10 billion from mast application fees and similar charges. That needs to be reversed.”

While backing the bill to increase NAMA’s earnings from the charge, the AON urged lawmakers to look at the issue holistically rather than in isolation. The association proposed that aviation-related funds be removed from the Consolidated Revenue Fund currently routed through the Treasury Single Account (TSA) and placed instead in a dedicated pool, which it suggested could be called an Aviation Development Fund.

The AON said all these funds should accrue in that pool and that a share of the accumulated funds could then be allocated to the sector as needed. It noted that if the NCAA can remit N500 million annually to government and still remain profitable, the industry clearly generates sufficient surplus to sustain such a fund.