Suspended 800% hike in terminal charges
Players in the Nigerian aviation industry have described the suspended planned hike by 800 percent of terminal charges by the Nigerian Airspace Management Agency (NAMA) as the height of insensitivity by the government and its agency.
Experts, who spoke to Daily Independent, said that if the proposal, which was scheduled to commence from September 1, 2024, had sailed through, it would have led to bankruptcy in the airline sub-sector as less passengers would patronise the industry.
The suspended charges were coming at a time when the purchasing power of most Nigerians has reduced. The capacity of the airlines have also nosedived as more than 60 percent of their aircraft are out of service due to many reasons, including the failure to recover their aircraft from maintenance yards abroad as a result of unstable and scarce forex.
There are also fears that one-way tickets on Lagos-Abuja for instance, may rise between N400,000 and N500,000 from the current N150,000 and N200,000.
However, players in the sector said rather than seek improved revenue through 800 percent hike in charges, NAMA should look inward and shed itself of unwarranted staff on its payroll.
Engr. Farouk Umar, Managing Director, NAMA, had at a forum in Lagos last week, disclosed the plan by the agency to increase its charges by 800 percent.
According to Umar, the current navigation charges by NAMA had been in place since 2008 at a time one-way domestic ticket was only N16,000 and now to about N200,000 and was no longer sustainable.
He explained that NAMA still charges N50,000 for every extended hour at sunset airports when a litre of diesel was sold at about N113 per litre 16 years ago, but the same is sold for over N1,400 in today’s market.
Besides, he emphasised that the agency’s unit rate for international flights charged for service provision remained about $70, while domestic flights were charged N6,000.
According to him, the new unit rate/minimum charge for en-route would be N18,000 from N2,000 per flight, while the new unit rate/minimum charge for Terminal Navigation Charge (TCN domestic) would be N54,000 from N6,000 per flight with effect from September 1, 2024.
Besides, Umar stated that the extension of hours of service would be reviewed upward from N50,000 per hour to N450,000, arguing that this would enable the agency to recover the cost of diesel and other logistics during the period of extension.
But the planned hike has not gone down well with industry experts, especially airline operators, who said NAMA was insensitive of the impact of its policy on the operators and the flying public.
Capt. Ado Sanusi, the Chief Executive Officer (CEO), Aero Contractors, said the hike was unjustifiable.
Already, Sanusi decried that the airlines were operating with very tiny profit margins.
According to Sanusi, who was also a former Managing Director of NAMA, it was obvious NAMA could not fund its annual budget because of its overweight costs.
Sanusi declared that high pricing would further reduce the number of air travellers as potential passengers might seek alternative modes, irrespective of the inherent threat.
He also warned that the policy may lead to an increase in flight cancellation among the airlines as none of them would fly until they have full seats.
He feared that this option would lead to poor overall reputation and trust of the aviation market, thereby causing long-term customer dissatisfaction.
Besides, he exercised the fear that some of the airlines, especially those with low fleets, may be compelled to shut operation.
He added: “Airlines will face significantly higher operating costs, which could force them to increase ticket prices and this may lead to a sharp decline in passenger number. Passengers will have to travel only when they want to travel because air travel will be so high and it’s only for those who can afford it.
“Also, smaller airlines – airlines with just one or two aircraft and a very tight profit margin, might struggle to stay in business because this may lead to bankruptcy. We are already operating at a very tight profit margin. So, any increase in our cost will eat up the profit and then will lead to bankruptcy.”
Grp. Capt. John Ojikutu (rtd), CEO, Centurion Aviation Services, challenged NAMA to render account of its collection of the statutory 23 percent provided for it from the 5 percent Ticket Sales Charge/Cargo Sales Charge (TSA/CSC) by the Nigeria Civil Aviation Authority (NCAA).
According to him, this runs into about N30 billion annually for NAMA only.
Ojikutu, who is a fierce critic of the airline operators, however, said that the indigenous carriers needed support to remain in business.
He said: “By my last calculation on the intercontinental passengers’ traffic alone with the current ticket fares, the share of 23 percent from one million passengers alone cannot be less than N15 billion. This amount does not include the charges on the ticket sales for five million domestic passengers, cargo sales charges and the chartered flights charges.
“If all these are calculated rationally and sincerely, the entitlement of NAMA should not be less than N30 billion. I need to be challenged by the NCAA and NAMA on this matter, which I have been challenging the NCAA on since 2016 even up to the National Assembly. Everything about the 5 percent on TSC, CSC and chartered flights charges is nothing, but institutional corruption.”
Capt. Samuel Caulcrick, aviation expert, stated that rather for NAMA to unilaterally increase charges, it should dialogue with the airlines and seek ways to help the operators reduce fuel burns at holding points and direct routings.
Caulcrick, who was a former Rector at Nigerian College of Aviation Technology (NCAT), Zaria, explained that the airlines would eventually pass the percentage of the increase to passengers.
He added: “NAMA should remember that 26 percent of the 5 percent Ticket Sales Charge, paid by the passengers, fund NAMA as legislated in the Aviation Act. NAMA, like everyone else, should prioritise efficiency that will cut costs without compromising operations.”
Also, Capt. Ibrahim Mshelia, the CEO, Westlink Aviation, a chartered company, said that NAMA as a recovery agency had the right to increase its charges, especially with the current economic situation.
He, however, declared that the imposition of the new charges would force some airlines out of service.
“You cannot continue to fly empty seats. You can fly empty seats some of the time, but not all the time. You will go out of business too,” he said.
Besides, he opined that the contribution of its 50 percent revenue to the Treasury Single Account (TSA) may be responsible for the proposed new hike.
He maintained that the heavy deduction of 50 percent revenue by the Federal Government would affect its salary payments, while it would continue to be difficult for it to dispense its duties to its clients.
According to Mshelia, the imposition would lead to increased airfares, as the airlines would impose additional charges on the passengers.
“Of course, it will affect their own cost as well. The airlines, too, just like NAMA are supposed to recover their costs by laws with profit. So, if you increase navigation charges from N16,000 to N54, 000, the airlines will now go back to their calculators, plug in a new amount and it will give them the appropriate amount indicated there. It’s not rocket science. The airlines would be justified in increasing their fares as well.”
Engr. Sheri Kyari, a management staff of 7Star Hangar, emphasised that the sudden jacking up of the rates by 800 percent was a killer to the industry, predicting that more airlines would go under.
He also said that the planned increase was justifiable in the face of rising inflation, but insisted it was coming at the wrong time.
He encouraged the government to support airlines and the ground handling companies to prevent loss of jobs.
“The government should be sincere with providing palliative measures to the industry,” he added.
Mr. Simon Tumba, aviation analyst, said the management was unaware of the impact of its policy on the industry.
Tumba stated that the agency was only interested in raising revenue and cared less about the consequence of its action.
He insisted that increasing user charges had never developed or helped the industry, noting that the purchasing power of most Nigerians was low, while there had been depletion of fleet by most carriers in recent times due the high cost of forex for maintenance, along other associated running costs.
“How many people can afford a one-hour return fare of N400,000-N500,000? Perhaps when the airlines close down and there’s no revenue to be made by NAMA and other agencies, perhaps then, reason would prevail. I indeed lack the appropriate words to describe this policy,” he added.
