President of the Aircraft Owners and Pilots Association, Dr Alex Nwuba, has called on the Bola Tinubu-led Federal Government to overhaul Nigeria’s aviation cost structure, warning that excessive charges and taxes are ultimately passed on to passengers.
In an interview with ARISE News on Saturday, Nwuba highlighted that over 70% of the cost of an airline ticket comes from fees and taxes, with airfare itself representing only a small portion.
“If you look at your ticket, over 70% of the cost is related to charges and taxes. So the industry itself, not just consumers, is concerned about these charges, saying the Federal Government should review them,” he said.
Nwuba further pointed to structural issues beyond ticket fees, highlighting high financing costs as a key challenge.
He said, “The other problem with that is if you also look at it from the standpoint of beyond the charges, all of the related costs are affected.
“You have an industry where the airlines are screaming that there’s no money, they’re having real challenges, but the airport operators, the service providers, are putting up double-digit revenue growth.
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“And so one must look at addressing this issue, not from the airline point, but really from the regulator and the government side, that there are too many charges, too many costs.
“Then you have the interest rate regime. The minimum, of course, the Central Bank’s rate is about 19%, which gets passed on to the banks, and so airlines pay 37% in financing costs for equipment and funding of the airline.
“This is also another cost passed on. So really, we must look at the entire cost. The problem in the aviation sector is the cost structure. This cost structure is what is passed on to the passenger.”
He highlighted high fuel costs, noting, “We pay 17% more for fuel charges, and fuel constitutes over 40% of the operating cost of an airline. Airport revenues are partly remitted to the Federal Government, leaving only 50% to provide essential services, which leads operators to levy even higher charges on airlines, and ultimately passengers.”
“The problem in the aviation sector is the cost structure. These costs are passed on to the passenger. If we lower fares, we improve connectivity. The entire industry must re-examine this structure,” he said.
On ongoing discussions with the Minister of Aviation and other agencies, Nwuba said, “A lot of people have said that in the last two years or thereabouts, the minister, Festus Keyamo, has not done badly. But… we are engaging the minister at the Aviation Safety Roundtable and other agencies on cost-related issues.”
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He also emphasised the need to reduce charges passed to passengers that are higher than in other African countries.
“We operate a free market system… no matter what the airline costs are, the airport costs are, service provider costs are, they’re all borne by the passenger. The airlines are not subsidising the operations for the operators,” he said.
Calling for reform of revenue allocation, he added, “The revenues that come to the airports and the agencies should be left in the agencies… we must re-look at the whole structure of our charging structure, and then… we can lower fares.”
He concluded that addressing these issues would improve airline connectivity and affordability across the country.
Story Credit: Punch Newspapers
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