Multiple taxation, trapped funds, spike airfares

Despite economic slowdown that has curbed demand for air travel, Nigerians are still paying some of the highest airfares for regional and international flights, compared with other Africans.

Experts in the aviation sector say the exorbitant fares arise from the over $700 million airline funds trapped in the country, multiple taxation and the recent scarcity of aviation fuel.

BusinessDay checks reveal Turkish, Kenya and Ethiopian airlines charge an average sum of 395 pounds to 400 pounds for an economy class return ticket from Ghana to London.

The same airlines charge an average sum of 500 pound to 550 pounds for an economy class return ticket from Lagos to London.

British Airways charges about 669 pounds for a return ticket from Ghana to London, and 705 pounds for a return ticket from Lagos to London.

The capital controls and unorthodox FX policies enacted by the Nigerian government have continued to impact airline operators negatively, as their funds trapped in Nigeria rose to $700 million in April from about $500 million in January.

Aviation experts say the forex blockage has caused an unparalleled increase in airfares from Nigeria to other countries, and the effect may stunt the growth of the industry.

They say airlines increased fares to cushion declining sales and strains from the FX scarcity.

Raphael Kuuchi, vice president, International Air Travel Association (IATA), recently flawed the high taxes imposed on airlines operating in Nigeria, saying the taxes were above global standards.

Statistics from IATA show that the Federal Airports Authority of Nigeria (FAAN) imposes a levy of $20 on short-haul flights and $60 on long-haul flights to cushion declining sales and strains from the FX scarcity.

The report explained that these additional costs damage tourism, penalise SMEs trying to expand overseas and hamper remote regional cities.

Although, taxes on flying are often billed as ‘green taxes,’ IATA noted that globally, it was exceptionally rare for the revenue they raise to be ring-fenced for environmental protection projects.

John Ojikutu, secretary general, Aviation Round Table Initiative, (ART) and former airport commandant at Murtala Muhammed International Airport (MMIA), Lagos, told BusinessDay that airfares major international airlines charge in Nigeria would remain higher than what was obtainable in the sub region to Europe or to the US because of the exposure of these airlines to poor aeronautical safety and security infrastructure at Nigerian airports.

Ojikutu said in many cases, regardless of any assurance on safety and security systems given by Nigerian aviation or airport authorities, these airlines provide secondary security screening to passenger checked-in baggage at a cost.

“In addition, the insurance premiums on these flights to Nigeria are higher than those to other countries. These are the costs that are passed on to Nigerian passengers,” Ojikutu said.

A spokesperson from a domestic airline in Nigeria, who craved anonymity, told BusinessDay that the issue of double taxation by the regulatory agencies on airlines was one of the major reasons fares in Nigeria were high and this was further passed down to the passengers.

“Another issue is the exchange rate whereby aircraft spare parts are gotten at a ridiculously high amount,” the source said.

Joseph Arumemi-Ikhide, executive chairman, Arik Air, disclosed recently that the marketers couldn’t fuel 15 of the airline’s 24 aircraft at the same time due to the inadequate number of dispensing trucks and the constraints of the domestic terminal.

This means airlines are often delayed as a result of the refuelling chaos, and this increased cost is usually passed on to the price of tickets sold in the country.

The IATA boss urged the Nigerian government to recognise aviation as a socio-economic enabler and provide the appropriate infrastructure, saying “it does not make sense to increase taxes when infrastructure is at parlous state.”

He encouraged government to reduce taxes and charges on infrastructure in order to attract more capital into the sector.

 

IFEOMA OKEKE