…seeks FAAN-style flat charge, dedicated Aviation Development Fund
The Airline Operators of Nigeria (AON) has called on the National Assembly to overhaul the existing five per cent Ticket, Charter and Cargo Sales Charge (TSC), describing the percentage-based levy as outdated and increasingly burdensome to domestic airlines.
The association urged lawmakers to replace the current system with a flat-rate structure similar to the Passenger Service Charge (PSC) administered by the Federal Airports Authority of Nigeria (FAAN), arguing that such a model would create a more level playing field for airlines.
The AON made the submission on Thursday during a public hearing on the proposed revision of the statutory sharing formula for the five per cent TSC at the House of Representatives.
The association was represented by former Managing Director of the Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi.
Presenting the association’s position, Iyayi said the current TSC model had outlived its usefulness because it imposed the same percentage burden on airline revenues regardless of operational costs, routes or ticket prices.
He said the association had already developed a broader proposal for reforming the funding framework of the aviation industry.
“The five per cent 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 produced a document addressing institutional reform for the entire funding policy of the industry”, he said.
According to him, the association favours a system similar to FAAN’s PSC rather than a percentage levy on airline earnings.
“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 five per cent is charged on everything an airline earns,” he said.
Iyayi linked the difficulty faced by airlines in remitting the charge to the sharp increase in aviation fuel prices, saying domestic operators had struggled to meet their TSC obligations to the Nigerian Civil Aviation Authority (NCAA) since March.
He said the situation had forced some airlines to rely more on charter operations to generate revenue.
“Since March, we have experienced fuel shocks worldwide. The average fuel price increase elsewhere in the world was 60 to 80 per cent, but in Nigeria it was 270 per cent”, he said.
He added that fuel now accounts for about 40 per cent of airline operating costs, leaving little room for operators to meet additional percentage-based charges.
The AON also raised concerns over the utilisation of funds generated by the NCAA, particularly fees collected on masts and other structures erected within the airspace.
Iyayi explained that the geolocation information for such structures was required to enable NAMA to produce low-level navigation charts, which are critical to improving the utilisation of the country’s airspace.
He, however, lamented that the absence of adequate low-level navigation charts had restricted certain aviation operations, particularly night-time low-level helicopter flights.
The association said the infrastructure gap was also limiting the productive use of aircraft operated by domestic airlines.
“Aircraft that could be flying eight to 10 hours a day are used for only about six hours because of inadequate infrastructure”, Iyayi said.
He further alleged that the NCAA had collected more than N10 billion over the past 20 years from mast application fees and related charges, arguing that the funds should be properly accounted for and channelled towards the development of aviation infrastructure.
Iyayi pointed out that the AON, while supporting the proposed increase in NAMA’s share of the TSC, urged the National Assembly to consider the broader funding structure of the sector rather than treating the proposed amendment in isolation.
The association, he said proposed that aviation-related revenues currently channelled through the Consolidated Revenue Fund and Treasury Single Account (TSA) should instead be pooled into a dedicated Aviation Development Fund.
According to him, such a fund would provide a more sustainable financing mechanism for critical aviation infrastructure and development programmes.
He argued that a dedicated funding pool would also enable government to retain and reinvest a portion of the revenues generated by the aviation industry.
The AON Representative added that the sector’s ability to generate substantial revenues demonstrated that a structured development fund could be sustained without undermining government’s legitimate revenue interests.
He urged lawmakers to adopt a comprehensive approach to aviation financing that balances government revenue needs with the survival, competitiveness and growth of domestic airlines.