Passenger Service Charge (PSC) is paid by air passengers passing through the country’s airports. The PSC is collected by the airlines upon purchase of tickets and is paid to Federal Airport Authority of Nigeria (FAAN) upon completion of the flight.
The charges are used to cover the cost of maintaining common areas in the passenger terminals, providing passenger information, maintaining security and ensuring that customers can use the airport in comfort and with confidence.
The last time PSC was increased was in 2011, eight years ago, when the local currency was more than twice the current value and cost of operation was far lower than what obtains currently.
In relation to airfares, the cost of a flight ticket has more than doubled because of increase in cost of operations, but FAAN has stuck to the same passenger service charge since then.
Inflation through these years has drastically affected the cost of doing business; so is the cost of equipment, staff remuneration and introduction of capital intensive facilities and equipment to modernise passenger facilitation, airport infrastructure and check-in system.
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Within this period also airlines and other airport service providers have reviewed their charges severally.
Speaking on some the reasons why the authority is reviewing its PSC, a source at FAAN who craved anonymity, said “We have four new terminals built to international standards, the PSC tariff fixed eight years ago, will not be suitable for these new terminals due to new technology, maintenance and other related costs, as we usher passengers to new IT-driven service that is time saving and easy for air travellers.
“We have to also admit that passenger traffic has grown during the period by more than 45 per cent between 2011 and 2019. The effect of this increased traffic on the airport facilities needs to be taken into consideration because FAAN would spend more money on maintenance, replacement of fittings and transaction management.”
Although the source did not disclose the amount that will be paid as new PSC, but explained that the increase is critical at this time because there is the urgent need to begin repayment of the $500 million Chinese Export-Import Bank loan and the $100 million DMO facility counterpart funding used in building the new terminals in order to meet the terms of agreement that guided the establishment of the terminal facilities.
John Ojikutu, former military airport commandant at the Murtala Muhammed International Airport, (MMIA) told BusinessDay that he sees nothing wrong in FAAN increasing PSC because of the rise in naira against the dollar which is impacting on the purchase of aviation amenities.
“I do not see anything wrong in FAAN increasing PSC because things have increased. Some airlines on the other hand are only deceiving themselves by charging the same fare they were charging in 2014 and 2015. Aviation fuel has increased. In 2015, one dollar was N180, today it is N360 to a dollar and some airlines are charging the same fare. How can they make profit?
“So, it is only logical for FAAN to increase the PSC because everything has increased. For instance if FAAN wants to buy runway light now, the price it was sold ten or five years ago cannot be the same price now. Most of the things we use in aviation are bought offshore including aviation fuel. None of these things are provided here.
“So, if they want to buy them, they have to buy them in dollars. If dollars have increased, price of services will increase. If FAAN increases its PSC, they are justified to increase. The airlines too can increase air fare based on the fact that dollars have increased,” Ojikutu said.
However, Tayo Ojuri, the CEO of Aglow Limited, an aviation support services company in Nigeria told BusinessDay that in increasing PSC, the justification is always driven by service level and convenience the agency provides for passengers.
Ojuri noted that passenger experience across Nigeria’s airports is improving especially with the upgrade of the terminals; he added that it is only expected that FAAN will consolidate on what they are doing and provide even better services to customers.
“It is only logical for FAAN to increase PSC especially with the current increase in dollar rate, provided they deliver the needed services for passengers and the airlines,” he explained.
IFEOMA OKEKE
