OF the N25, 000 or N30, 000 one pays on a full service airline from Lagos to Abuja, about 40 per cent or more actually goes to airport taxes. For a return flight, the “taxes” can cost more than the airplane ticket; however, mandatory taxes and insurances are a third of those costs.
The bulk of these so-called taxes are actually a discretionary fee called fuel levy. The rapid decline in the oil price has meant that the fuel levy has become a neat way for full services carriers to promote cheap tickets.
Medview, Arik, Aero, IRS and many other airlines said that one of the biggest components of these surcharges was fuel levy, which was linked to the rand/dollar exchange rate as fuel was billed in dollars.
“Therefore it is up to the airlines’ discretion as to how much they charge as part of the fuel levy as it forms a large part of the business’ cost base,” said Olumide Ohunayo, a travel expert.
Take, for example, an economy return flight between Port Harcourt and Abuja, the approximate fare is between N25, 000 and N30, 000 for most of the Nigerian carriers.
That looks compelling when compared to no frills, low-cost airlines. Depending on the model, some airlines charge customers separately for their fuel bill. This would be the same as climbing into a taxi, being told the rate to the airport is N500, but when it comes to paying, you discover you still need to fork out another N200 for petrol.
An aviation expert, who works with one of the airlines in the country, said that the fuel levy “is just a marketing strategy to cover up the real airfare. Other airlines implemented a fuel levy to cover the additional fuel cost from high oil prices. Now the oil price has dropped significantly and they are cashing in.”
A source told The Guardian that airlines did the same with airport tax, adding that they added a margin on to it to disguise the hidden airfare and if a ticket costs N9, 000 for instance, the airport taxes were N15, 000.
In most cases, the airport taxes will be about N10, 000 and the ticket is N15, 000 and it is a case of who is misleading the consumer, because they feel that they have to pay airport taxes and just accept it meanwhile the airline has added their profit on to it.
These astronomical taxes have more than hampered the smooth operations of airlines as the carriers are in serious financial dire straits. These taxes range from five per cent Ticket Sales Charge (TSC), aviation fuel tax,high cost of rent for offices, high cost of electricity bills and many other taxes and charges that stakeholders said were killing.
The Director General of the Nigeria Civil Aviation Authority (NCAA), Captain Folayele Akinkuotu at a media interaction with reporters last week, alluded to the fact that Nigerian airlines were ailing, just as he vowed that the authority would shut airlines that were adjudged unhealthy.
He said that already, the NCAA was interacting with airlines to know that bills were paid promptly, coupled with other factors that showed whether airlines were healthy or not.
The lack of indigenous skilled manpower like aircraft engineers, pilots have combined to make operators go for expatriates who are paid three times or more than indigenous workers.
The NCAA chief equally highlighted the difficulties airline operators go through, stressing that profit margin for airliners globally was very small.
According to him: ‘’When you see an aircraft that is about to take off from Lagos to Abuja, for instance, and the cost per ticket is put at N20, 000 or N25, 000, you begin to calculate huge amount of about N3 million for the airline for that single trip, but we forget that the airline will pay for fuel, pay bills to the agencies, pay for catering, pay salaries, pay for offices and at the end of the day, they are left with virtually nothing.”
The Director General of International Air Transport Association (IATA), Tony Tyler at Africa Day forum in Lagos, this week, bemoaned high cost of airport taxes and charges, stressing that the issue must be addressed.
“His words: “If airlines and their passengers were enjoying a beautiful new modern and efficient facility that might be acceptable, but they are paying for an airport that is still under construction. You would not charge a toll for a bridge that is not yet built.”
On top of charges for services, governments are looking to aviation as a source of funding. A number of revenue raising regimes exist such as solitary taxes, tourism taxes, VAT and sales taxes and so on.
He further disclosed that IATA was working closely with the Nigerian government to resolve the differential charging regimes for air navigation charges between international and domestic operations.
According to him: “ICAO has clear principles on charges. These include cost-relatedness, non-discrimination and transparency. It is also recommended that charges be developed in consultation with users and there should be no re-financing.”
Tyler, however, commended the government of Ghana for, “giving us an example of leadership in this area. Ghana is focused on keeping the costs competitive with a series of measures. The latest was a major restructuring of fuel charges that eliminated a subsidy paid by aviation to other fuel users. The boom in Ghanaian aviation that started in 2009 continues.”
He stated that government must recognise that every dollar counts, stressing, “if we average the entire industry’s profits for 2012, airlines retained about $2.50 for every passenger. African airlines have been hovering around break-even for decade or more. Even a small tax or charge can turn an operation from profit into loss.”
The IATA chief, however proposed that governments kept the costs of connectivity competitive, plan to pay for infrastructure based on volume growth-where everyone paid a little and re-invest into the industry-both in physical infrastructure and in training to develop the skills and talent necessary to grow connectivity.
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