Ex-NAMA MD faults 5% ticket charge, proposes Aviation Development Fund

By Dickson Omobola

Former Managing Director of the Nigerian Airspace Management Agency, NAMA, Mr Roland Iyayi, has faulted the five per cent Ticket Sales Charge, TSC, collected from passengers by airlines on behalf of the Nigeria Civil Aviation Authority, NCAA, saying it is unsustainable for domestic carriers.

TSC is a statutory levy collected on every airline ticket sold in Nigeria.

Iyayi, currently a trustee of the Airline Operators of Nigeria, AON, also urged Federal Government to overhaul the existing TSC structure and channel the proceeds into a dedicated infrastructure fund to accelerate the development of Nigeria’s aviation sector.

He said the country’s aviation industry lacked the profit and market maturity required to support an ad valorem system of charges, adding that airlines were struggling to cope with the current arrangement.

He described the five per cent TSC as a sham that had long defeated the purpose for which it was introduced, which was to develop aviation infrastructure, and proposed replacing it with an Aviation Development Fund that would be insulated from government revenue accounts and dedicated to infrastructure projects within the sector.

His words: “The structure of that TSC should be changed completely, and that is what we are advocating. We are advocating that, remove the idea of five per cent, because the airline industry is not five per cent profitable anywhere in the world. The most profitable airline is posting about 2.5 per cent. When you say you want to use an ad valorem model of passenger taxes or charges, it must be in a mature market.

Nigeria is not a mature market. So, when you introduce that, you introduce distortions.

“Right now, we have distortions of markets that even the industry is not able to cope with. We had an exogenous shock recently of fuel, and what happened? Airlines are borrowing money to buy fuel to fly. The composition of fuel in terms of cost as an airline is about 40 per cent depending on the type of aircraft being operated.

“We should not be comparing Nigeria to developed markets, Nigeria is an underdeveloped market. Therefore, the context is different. When was the TSC introduced? Why was it introduced? It was introduced over four decades ago. Somehow, surreptitiously, some individuals within the NCAA when the act was being put together in 2006 went on to introduce it and now it is law.

“If you want to sustain or retain that structure, what you really need to do is remove every element that has to do with the ad valorem structure. I will advocate that it be given a new name, the Aviation Development Fund. It should be outside of government revenue accounts, such that the monies accruable there are monies that will be tied to an infrastructure development programme.

“It will ensure that over the next maybe 10 years, the industry gets infrastructure that are adequate for its growth, so that government doesn’t have to be worried about providing budgetary allocations. That way, whether government does or not, as long as airlines are flying, there will be an infrastructure fund. That is what I suggest we should be looking at, so that you remove the industry from direct government funding. And then our airports are now seen as airports.”

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