November 25, 2020

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Aviation sector quakes under huge debts

7 min read

The fate of the nation’s aviation sector may be hanging on the precipice over N22b debts owed by some local airline operators still in dire need of a lifeline and whose operations may be grounded in no time as a result of their insolvency, report Ibrahim Apekhade Yusuf and Charles Okonji

 

To say the nation’s aviation sub-sector is sagging under the weight of debts is certainly stating the obvious. Truth is the rising debt profile of the aviation sector owed by indigenous carriers is not only worrisome but cause for concern.

Crux of the matter

While explaining the enormity of the crisis bedeviling the aviation sector, the Minister of Aviation, Hadi Sirika recently disclosed that the local airlines’ total debt burden to regulatory agencies stood at N22 billion. The debts were incurred within the period of 10 years.

A breakdown showed the sum of N19.37 billion and $6,993,284 million (N2.7 billion) as unremitted Ticket Sales Charge (TSC), and Cargo Sales Charge (CSC) collected on behalf of the Nigeria Civil Aviation Authority (NCAA) and its sister agencies.

Sanction underway for erring airlines

Meanwhile, the NCAA has concluded plans to embark on recovery of over N22 billion owed aviation agencies by indigenous carriers in the last 10 years.

The move by the regulatory body would lead to disruption in air services at airports nationwide.

Giving this insight recently was the NCAA’s Director-General, Capt. Musa Nuhu. He made this known in Abuja at a stakeholders and general public hearing on the repeal and enactment of civil aviation bills of aviation agencies, stressing that this option was the only way to compel the airlines to pay their debts.

He decried the attitude of many of the airlines that failed to remit what they collected as five per cent Ticket Sales Charge (TSC) and Passenger Service Charge (PSC) collected on behalf of the agencies.

Nuhu said: “We are going to start taking action and implement actions to recover most of the money. We have started action last week on airlines that owe us. The irony is that these are taxes the airlines collected from the passengers. These are not their money. They collected but refused to remit.

“We have also heard that the government has refused to assist the carriers. We all remember that in 2011, the airlines received close to N200billion. They are yet to pay back. If foreign airlines are not paying, why are our own airlines not paying?”

No longer at ease with chronic debtors

Speaking with our correspondent in an interview with Sam Adurogboye, the General Manager, Public Relations Department at the NCAA confirmed that the process of debt recovery is on as the agency is determined to get this over with as quickly as possible.

Nigeria aviation News
Minister of Aviation, Hadi Sirika

“The process is ongoing. We have done that to ensure that they pay for the services as we go, like pay as you go. So that before service are rendered they must make payment accordingly. However, for those who have been owing us and the figures have piled up, we also discussed and agreed with them that after every approach to the NCAA to render one services or the other, they must also show evidence of having paid for the old debts while the existing bills are paid for before services are rendered by the NCAA.”

On why the agencies have to allow the local airline operators to owe such humongous debts, over N22.billion, thus leading to the arrears and backlogs, he offered a plausible explanation.

“Well, it didn’t start today. It’s something that built up gradually. There is what is called five per cent ticket sales charge, and five per cent on cargo sales charge. This means when you fly from one part to the other, five per cent is added to the cost of your air travel ticket and that five per cent is what the NCAA earns,” he said, adding, “NCAA doesn’t draw money from the government. It is passengers that travel that pay for the services of NCAA, for safe travels for those travelling by air. The airline as an industry, they were the ones that even processed it and ask the NCAA to collect the money and it was working well until such a time that one or two airlines came up they started holding back our money.

“It was what led to a bandwagon as other airlines started doing the same thing and it now climbed up to a situation where we now have to agree that there must be evidence of paying old debts and pay outright for any current services being rendered. This is how it came about. It is not a thing that happened in one day. For those who are chronic debtors, he recalled that there was a time the issue of indebtedness was a big deal in the sector with an airline grounded by one of the agencies, and the federal government now directed that we should work out modalities for collecting these monies without any problem.”

Operators’ cry blue murder

To many operators, the charges and levies being demanded were arbitrarily and should be scrapped. During the three-day public hearing on new aviation bills at the National Assembly, following an appeal by the Airlines Operators of Nigeria (AON) that the mandatory five per cent TSC and CSC should be scrapped or reduced to support the operating airlines, the counsel to the AON, Chinasa Unaegbulam, had urged the Senate to repeal Clause 23 of the Civil Aviation Act on five per cent TSC/CSC, adding that operators needed a lifeline and a voice in industry’s regulations.

In a reaction to the appeal, Sirika raised a point of order that the debts in question were not general charges as erroneously stated by the AON, but a mandatory charge on passengers and cargo, which the airlines had collected on behalf of the NCAA and other regulatory agencies, but were not remitted.  There are about 37 sundry charges in the local aviation industry of which TSC and CSC are just two of them, the AON have argued.

Currently, there is a plan to change the dynamics of the sharing formula but as it stands the NCAA gets 56 per cent, NAMA 22 per cent, NiMET nine per cent, NCAT seven per cent, and AIB six per cent.

Agency to blame for humongous debt

In the assertion of Capt. Dele Ore, the former Director of Operations, Nigeria Airways, the mountainous debts in aviation sector is due to frequent changes in the headship of agencies which makes continuity almost impossible.

According to him, the tenure of most of the agencies at the helms of affairs at the various agencies of the aviation sub-sector sector has never been stable. “Frequent changes of these parastatals. I put all the blame on the doorsteps of the regulators. As far as I know, without strict enforcement to the airline operators to do the right thing, otherwise they are likely to default. It shows poor coordination of all the parastatals. A situation where you allow the debts to mount hardly shows coordination. It means the agencies have failed.”

While noting that it is alright to extend credit facilities to the airlines but he would rather this is not overstretched.

More differing views

However, Chairman of the Senate Committee on Aviation, Smart Adeyemi, earlier said the amendment of the operating Act of the NCAA was crucial and timely, saying its essence is to encourage cross fertilisation of ideas with a view to improving the sector and removing all forms of ambiguity.

Senator Bala Na’Allah said the TSC was not money charged to airlines but money that passengers pay for safety, infrastructure and the likes.

Na’Allah said it was wrong for the airlines to make it look like the monies were charges, adding that those funds must be recovered.

It may be recalled that the Managing Director, Federal Airports Authority of Nigerian’s (FAAN), Captain Rabiu Yadudu, had in July, told the House of Representatives’ Committee on Aviation that a local airline owed FAAN N13billion of unremitted revenue.

In a related development, Chairman WestLink Airlines, Captain Ibrahim Mshelia during a news briefing recently said it was wrong for any airline to collect monies on behalf of any government agency and refuse to remit it, especially as the monies in question were already paid.

He said: “I am a member of the AON, but I have a different opinion especially on the five per cent TSC/CSC. Why would I collect money on behalf of the government and not remit it, especially as I collect before the flight?

“Except it is some form of online transfer that is difficult money can be remitted on or before 90 days, give me 90 day and I’d remit if I am owing. Some of us are remitting these five per cent charges and we’ve been doing so for years without default.”

Also speaking on the TSC, a former Director-General, NCAA, Dr. Harold Demuren, said the history of the charge dated back to 1989, and was done for good and specific reasons.

Demuren advised that the charges should not be reviewed downwards any further, adding that they were initially canvassed for 10 per cent when it was Federal Civil Aviation Authority (FAA).

“Federal Government built all these airports and wanted a return on investment and was advised by the Federal Aviation Administration (FAA) to do what was done in America to enable them to maintain these infrastructure by introducing these charges.

“The TSC was introduced because of NCAA and NAMA but now others have been added which is all good since they are part of aviation but I beg you, do not review the percentage shared to the NCAA downwards as these monies help in training engineers, inspectors and other critical areas,” Demuren said.