•Levy necessary to boost revenue –Concessionaire
By Chinelo Obogo, talktonelo@yahoo.com
Recently, the Minister of Aviation and Aerospace Development, Mr. Festus Keyamo, stirred the hornet’s nest when he announced that a private company, Naebi Dynamic Concept Limited, has been contracted to collect a $300 levy per landing from helicopter operators.
The directive, which was unanimously rejected by the chopper owners, has remained a controversial matter in the industry.
The operators are miffed over the scathing levy and do not see the justification for it, considering their existing payments to aviation regulatory bodies.
To avoid muddying the pond and overheating the polity, the players are seeking an audience with Keyamo to discuss the levy’s legality and potential harm to the industry.
Naebi Dynamic Concepts Limited, which is acting on behalf of the government, is stoutly defending the aviation minister’s directive, describing it as a necessary measure to improve security, transparency, and data collection on helicopter activities in Nigeria. The company added that the benefits of the rule are legion, including boosting revenue generation for the aviation sector, enhancing government oversight of helicopter operations, improving overall aviation security and addressing concerns around unidentified helicopters flying within Nigerian airspace. But operators oppose Naebi’s stance, saying the new charges contradict the NCARs Act, which outlines established charges and levies.
The Chief Executive Officer of Aero Contractors, Capt. Ado Sanusi, said Nigerian airlines, operators, and service providers are currently facing difficulties and the unintended consequences of imposing high airport charges on struggling airlines can worsen the industry’s crisis. He opposed the fee because the service being charged for (landing platform use) isn’t provided by Naebi Dynamic Concept Ltd. He said the landing platforms belong to the Federal Airports Authority of Nigeria (FAAN) or private entities not Naebi and Naebi hasn’t contributed a dime to building or maintaining these platforms.
“ICAO standard and recommended practices are that you charge for services you rendered and on so many occasions, they recommend that all the services you charge must be on cost recovery basis. That means you are not supposed to make profit, you are supposed to cover your cost but some other countries try and make small profit here and there. When you come to an already sick industry that is in the Intensive Care Unit (ICU) and what you are trying to do is to see how much blood you can get from that patient, that means you’re going to kill the patient. The industry is in crisis, the airlines are struggling, the operators are struggling, the service provider is struggling and now you want to solve the problem of the agencies and say let us tax the airlines that are already struggling, bearing in mind that without the operators agencies will not exist.
“When I take off from Lagos, I file a flight plan and I pay air navigation services to NAMA. When I am coming back, there are landing charges. I pay FAAN for landing at the Murtala Muhammed International Airport (MMIA), there are terminal navigation charges when I come into the airspace. But where FAAN has no contribution to building a platform, why should they charge when I land there? It’s common sense. I am very sure the platform owners pay taxes to come into our waters and the operators are paying taxes here and there. There is no government in the world that has taxed themselves to prosperity. It is not possible because you will kill the business and when you kill the business, you kill employment and when you kill employment, you kill security, so, there must be a way of balancing taxation for economic growth.
“My position is clear, you do not charge for services you do not render. What is Naebi Dynamics providing? What services are they rendering? They are providing no services. If they are providing no services for the helidecks, then why would they charge $300? I hope the government through the Minister of Aviation would see reason and call for a stakeholders meeting with helicopter operators and maybe enlighten us. Usually, before you have these kinds of things you have meetings, you sensitise the operators ahead of time and tell them the reason for your decision and tell them what you want to use the money for. If you want to do an infrastructural development, you tell them what infrastructure you want to develop and you tell them that it is for their good. You cannot tax the operator to fund the agency, or else, you agency you will not have operators at the end of the day,” Sanusi said.
Daily Sun learned that the operators have two weeks after the government engaged NAEBI to collect the landing fees, the aviation ministry was yet to write the affected operators as most of them saw the memo on social media. However, the concessionaire has sent invoices to the operators, providing the company’s account details into which the charges would be paid, though it has not been verified if any operator has begun making payments.
Also speaking on the issue, the Chief Executive Officer of Top Brass Aviation, Roland Iyayi, said the issue of taxes, fees and charges and their adverse impacts have for so long been either ignored or overlooked in the industry as the failure of airlines have always been attributed to “one-man ownership syndrome”, lack of proper corporate governance, lack of requisite expertise or wrong types of aircraft. He said however, that no one ever mentions the adverse impact all the ‘obnoxious policies’ and unilaterally imposed taxes, fees and charges have on the economic wellbeing of domestic airlines. He said even worse, is the focus on increased revenue generation by all the government agencies in the sector, without commensurate value or quality of services and completely at variance with their establishment objective of being not-for-profit.
“Every domestic airline company in the country is exposed to a total of 13.5% in taxes including 5% ticket (charter/cargo) sales charge, 7.5% value added tax (VAT), 1% development tax, even before the applicable corporate taxes, PAYE, pension scheme, etc. Meanwhile, every single flight is in turn exposed to other fees and charges such as flight clearance, navigation, parking or landing, etc. Other personnel and equipment specific charges such as licensing, training, aircraft certifications, insurance, etc., are also applicable. Then we consider the operational expenses including fuel, maintenance, depreciation, etc.
“When all these are aggregated, we end up with taxes at about 32.7% of domestic airlines’ gross revenues. It is instructive to note that the world average of airline profitability is between 1.5 – 2.5% for major carriers with size and scope. Yet here in Nigeria, our experts pontificate on how an airline should be run profitably, even when they have never established or work in one in their entire careers. When arguments are proffered to justify some of the obnoxious policies and tax regimes, it is often said for instance, that the 5% TSC is paid by the passengers. Who provides the capacity for the passengers? Government or private airlines? Whose loss is it when seats are flown empty, considering that these are perishable? Is demand suppressed by an increase in ticket price or not? Why are ticket prices not unbundled in this country?
“Having successfully decimated the growth potentials of fixed wing airline operations in the country, the focus has now shifted to the rotary wing aircraft for the final stage to be set for the demise of the domestic industry.
The minister by fiat, sent out an undated or referenced letter, mandating that helicopter operators henceforth pay “Landing Levy” to the coffers of a private company with no infrastructure for such, but to increase revenue generation.
The past administration told the industry that it has installed the multilateration surveillance systems in the Niger Delta under the purview of NAMA for the purpose. What has happened? It is pertinent for some questions to be answered here:
What is the landing levy for and does it replace the industry standard landing fee? What services are being provided currently and not paid for by helicopters? Contrary to the minister’s assertion on national TV, helicopter operations are fully regulated in Nigeria. From licensing to helideck approvals to flight plans and landing fees. This landing levy is an arbitrary charge that is not doused in reality and has a chance of crippling the whole industry if not completely cancelled.
“The rationale apparently is that the oil companies would pay for the introduction of this new “Landing Levy”. Whoever the smart Alec is, who thinks that multinational corporations will simply increase their costs just because of a say so is highly delusional. Multinational oil corporations work within a structured framework to a budget. When costs increase abominably, a simple cost-benefit analysis is all they need to pull the plug, and they usually do without recourse or remorse. With the unfolding saga, we should prep for a massive layoff soon in the sector,” he said.