Domestic airlines may have been ripping travelers off and shortchanging government through some fees embedded in ticket fares with different names, a report has revealed.
Osita Chidoka had in November 2014, set up a ministerial committee to review aeronautical, non-aeronautical & passenger charges in Nigeria which came up with findings and recommendations, as part of plans for reforming and repositioning the sector.
However, highlights of the report submitted to the Minister recently shows that between 40 and 60 percent of ticket fare are hidden as fuel surcharge, with the code YQ, adding that ‘the computation of this sum is unknown to both passengers and government alike’.
The report added that “this same cost element has also been omitted by the airlines in the computation of both VAT and Ticket Sales Charge to government, resulting in significant loss of revenue to the Federal Government.”
The report added that “there is also a prevalence of inaccurate computation of statutory charges and non-remittance of the passenger charges collected by airlines to appropriate aviation authorities,” adding that such was unimaginable.
“With respect to passenger ticket charges, the basis of some of these charges, is not known and is quite arbitrary. For example, the committee analysed the basis of computation of passenger tickets for four domestic airlines (namely Arik, Dana, Medview and First Nation). The analysis shows that an amount ranging from 40 percent to 65percent of the airfare is hidden as fuel surcharge (also known as YQ). The computation of this fuel surcharge is unknown to both passengers and government alike. Equally, this cost element has been omitted by the airlines in the computation of both VAT and Ticket Sales Charge, resulting in significant loss of revenue to the Federal Government.
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“There is also a prevalence of inaccurate computation of statutory charges and non-remittance of the passenger charges collected by airlines to appropriate aviation authorities. From the tickets analysed, some airline operators deliberately charge as high as 9percent of Base fare as Ticket Sales Charge as against the statutory 5percent (expected to be remitted to the Government through the Nigerian Civil Aviation Authority (NCAA).
“One has to wonder the motivation for this act, and if the statutory charge in question will be appropriately remitted to the relevant government agency or rather, constitute part of the profitability of such airlines at the expense of both the passengers and government,” the report said.
On quality of service to travellers, the committee berated all airlines for poorly treating passengers, urging government to aggressively preach and implement the content of the passenger bill of right in order for travellers to know when and how to lodge complaints and claim necessary compensation.
It however, recommended that government should immediately increase the capital base of the airlines in order to sanitise the system.
“There is also a prevalence of poor service quality to passengers in the face of non-enforcement of the passenger bill of rights. The passenger bill of rights, as contained in the NCAA Act, clearly entitles passengers to several means of redress, in the event of any infraction. These rights are not known to most passengers nor are they being enforced by NCAA, resulting in a lot of passenger apathy.
“There is inappropriate business model of most domestic airlines. The minimum capitalisation requirement for domestic airlines is only N500 million, which at today’s exchange rate, barely covers the cost of effectively operating and maintaining one aircraft and therefore, does not ensure a fleet size that allows for economies of scale.
“There is need to sanitise the aviation industry through the introduction of minimum capital requirement and monitoring of the capital adequacy of airlines and monitoring of the health and viability of airlines.
“There is need for the undertaking of a full independent audit of the YQ fuel surcharge as charged by airline operators and the introduction of standards as well as sanctions for non-compliance”, the report signed by Ahonsi Unuigbe, chairman of the committee said.
While revealing that that there are over 50 charges imposed by the three aviation parastatals, NCAA, Federal Airports Authority of Nigeria (FAAN) and Nigerian Airspace Management Agency (NAMA), he said the industry is plagued by multiple charges “which in some instances, are charged by the different agencies for the same services (a quick example is the imposition of both Port charges, as well as Cargo charges by FAAN on the same cargo)”.
The committee therefore recommended that Navigational related charges should be harmonised (such as the merging of En-route Navigational Charge and Terminal Navigational Charge; into a single charge to be renamed as Navigational Charge);
Part of the recommendation also include that Violation of Airspace Fines be merged with violation of Air Navigation Regulations.
It also called for the ‘scrapping of the duplication of Contractor Registration Fees by NAMA, as this is also charged by NCAA. It said instead, it should just be charged and centrally controlled by NCAA.
“There is need for moderation of some of the charges that were deemed to be excessively high, such charges as Cargo Vehicle Surcharge; Car stickers; apron pass and documentation of clearing agents’ fees.
The committee also recommended that registration of Freight forwarders fees should be retained at N100,000 as against an increase to N250,000 while the proposed increase in import and export royalties be reduced to 5 cents per kilo as against 10 cents earlier proposed by NCAA.
It also asked government to eliminate air cargo fees and enforce passenger bill of rights as well as initiate public awareness campaign to increase public awareness about the bill of rights;
“There is need for integrated automation of the airport management system and improved debt recovery by the regulators from airline operators”, the report added.
Unuigbe added that if the recommendations of the report are implemented to the letter, the industry’s burden would be lessened.
“I believe that the recommendations of the Committee, if implemented, will go a long way in repositioning the competitiveness of the Nigerian aviation industry and reduce the burden on passengers without compromising service delivery quality,” he said.
Speaking on the development, John Ojikutu, a former airport commandant in Nigeria and now consultant to International Air Transport Association, blamed the NCAA for most of the issues raised in the report.
“The airlines have been doing thing over five years now but a regulatory authority seemed to look away, the whole thing is a combination of the fraud that is taking place in the system. How can the NCAA claim ignorance of what airlines have been writing at the back of the tickets for so many years just because they also collect theirs?
“It is incredible that a traveller buys a ticket for N20,000 and N13, 000 is being charged as fuel surcharge, how do they arrived at that, will NCAA claim ignorance of this exploitation over the years, why is it just taking a new Minister to uncover this. I believe the new Minister can stop this,” he said.
Sade Williams
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