The Managing Director and CEO of Nigeria’s oldest carrier, Aero Contractors, Captain Ado Sanusi has said that domestic airlines should stop funding aviation parastatals to enable them have funds to boost their operation and ensure their survival and profitability.
Sanusi said multiple taxation, charges including passenger service charge, terminal charge, landing and parking, overflying charge, 5 per cent ticket sales and cargo sales charge and navigational charge are what Nigerian airlines pay to the aviation agencies in addition to other taxes, noting that these charges erode their revenue and capitalization and made it extremely very difficult for the airlines to make profit.
This is why Nigerian airlines have average 10 years life span, while there are many registered commercial airlines, only very few are currently operating and many of the existing ones lack capacity.
He suggested that the Federal Government should find other ways to fund these agencies in addition to the revenue they could generate from general aviation and international operations and insisted that as long as these airlines pay these multiple charges they would not grow to become mega carriers.
Sanusi emphasized that because of the critical role airlines play as catalyst to any nation’s economy, government must provide airlines support for them to be sustainable and continue to provide critical services to the country.
“Why is it that Nigerian airlines don’t last long? We have studied the problems. We know the problems, but we have not tackled them. We have changed the names of the airline several times, but we have not removed the problems and the challenges that are facing the airlines. Without those challenges solved if you register a new airline today it is still going to face the same challenges that have been there for years. If we want to have successful airlines in Nigeria, we must solve those problems.
“We must face the multiple taxation. We must face the fiscal challenges encountered by airlines that have been funding these parastatals. We must look at the basics. We must look at what we have been doing for years and have not been getting positive results. There is no way we can have any change, any meaningful change, if we do not tackle the problem from the beginning. There is no way the airlines will fund the parastatals and they make profit. So the airlines are struggling. The parastatals are struggling. And we intend to have a viable aviation industry. It’s not possible. So there must be an intervention by government somewhere. There must be a change, a paradigm shift, from what we have been doing, from thinking that the airlines should fund the parastatals, the taxations that the airlines are having. We must also move from the same notion that, oh, airlines are high-profit organizations,” he said.
The Aero Contractors boss said 90 per cent of airlines that are doing well in the world today are either state owned or they have major state interest. This is because airline business is capital intensive so, government’s support of airlines would enhance capitalization and protection.
“About 90 per cent of the airlines that are very successful in the world were owned or are still owned by the state. Meaning, it’s a high intensive, capital intensive business. And so, we are now taking that high capital intensive and giving it to private individuals to do. And then when they do this, we also saddle them with multiple taxation. We have not given them the opportunity to be an infant industry where they are allowed to grow before those heavy taxes. So, the airlines are struggling, but they will pay those taxes. Even in advanced countries, when an airline is coming up, it’s what they call the infancy stage, where you have the waiver of some taxes so that they can grow before your taxes come in.
“But in this country the moment you start, the first day you start flying that is the first day you start paying the multiple taxes that you are supposed to pay. In fact, before you start flying you will be paying taxes, you will be paying for inspection you will be paying for licenses of aircraft, you will be paying for this, you will be paying for that. So many things that you need to pay for. Yes, I understood that it’s a capital intensive business, but you need to grow the market and you need to relax these taxes so that the Nigerian airlines can grow. Then the other thing is, most of the airlines that we have, or that grow and die, don’t have very good governance structure. And I think also the government should come in and ensure that when a company has come of age, they should encourage that company to go public.
“They should encourage that company to have corporate governance that has a proper board. And we hold people accountable for messing up a company, just the way they do it in the banking industry. You don’t go and mess around the economy of the country through a bank and you go scot-free. It’s the same thing. You can come and mess up the aviation industry, flying public in Nigeria, and also not only mess the economy but also jeopardize the lives of flying public and go scot-free. I think we must put that into consideration before we can now start seeing meaningful development in the aviation industry and we can now start seeing airlines surviving for a long time and all that,” he said.
