New Tax Regime Could Cripple Domestic Aviation, Air Peace Boss Warns
The Chairman and Chief Executive Officer of Air Peace, Allen Onyema, has warned that Nigeria’s domestic aviation industry is on the brink of a severe crisis following the introduction of new tax laws, cautioning that the measures could trigger massive increases in airfares and push local airlines out of operation.
Onyema raised the alarm during an interview on ARISE NEWS on Sunday, where he said the revised tax framework would place unbearable financial pressure on airline operators and could lead to the collapse of the sector within a few months if urgent corrective action is not taken.
According to him, Nigerian airlines are already overwhelmed by a wide range of taxes, levies and regulatory charges, many of which significantly reduce the actual revenue retained by operators from ticket sales.
He noted that airlines are often accused of overpricing, despite the fact that most of the fare paid by passengers goes to statutory deductions.
He explained that from a domestic ticket costing about ₦350,000, airlines may retain as little as ₦81,000 after mandatory charges are deducted. Onyema described the situation as unfair, saying the public perception that airlines are making excessive profits does not reflect reality.
The Air Peace boss criticised what he described as multiple and overlapping charges imposed by various agencies, including a compulsory five per cent deduction on every ticket sold.
He said such deductions, along with several other fees, have made it increasingly difficult for airlines to remain viable.
Onyema further argued that the practice contradicts international aviation standards. He cited the International Civil Aviation Organisation (ICAO), which he said discourages governments from using aviation charges as a revenue-generating tool, recommending instead that fees should be limited to recovering the cost of services rendered.
He noted that global best practice allows charges only in proportion to the actual cost of services provided to airlines, stressing that excessive levies ultimately weaken operators and stifle industry growth.
Recalling past policy reforms, Onyema said the 2020 tax law offered some relief to the aviation sector by exempting imported aircraft, spare parts, engines and ticket fares from customs duties and value-added tax (VAT). He said those concessions provided breathing space for airlines, even though operators continued to contend with other charges nationwide.
However, he lamented that the newly introduced tax law has reversed those gains by reintroducing VAT and other duties on aircraft, spare parts and ticket sales.
He explained that the importation of an aircraft valued at $80 million would now attract a 7.5 per cent VAT, with similar charges applied to spare parts and engines.
Onyema warned that when combined with Nigeria’s high interest rates—often between 30 and 35 per cent on bank loans—the renewed tax burden makes airline operations unsustainable.
He said these costs would inevitably be passed on to passengers, leading to a sharp decline in demand.
He predicted that if the new tax regime is fully implemented, domestic airfares could soar to unprecedented levels, with economy-class tickets potentially reaching figures that would be out of reach for most Nigerians.
He cautioned that such a scenario could force airlines to shut down within three months, with ripple effects on passengers, financial institutions and the wider economy.
The Air Peace chairman disclosed that airline operators, through the Airline Operators of Nigeria (AON), have repeatedly engaged government institutions to express their concerns.
He said submissions were made to the National Assembly and the tax reform committee, adding that lawmakers were reportedly taken aback by the financial realities presented by the operators.
Despite these engagements, Onyema said the industry’s warnings have largely been ignored, urging the government to urgently reconsider the policy to prevent a looming collapse of Nigeria’s domestic aviation sector.
