Tukur: Tax Policy for Aviation Industry Should Be Reviewed

The Managing Director of Afrijet Airlines, Alhaji Mohammed Tukur, in this interview, was of the view that government should review its policies in the aviation sector to help it grow and become profitable for operators. He spoke to Chinedu Eze. Excerpts:

Recently aviation unions protested against some appointments, saying that the people appointed are not competent, what do you think will be the consequence of appointing somebody that is not qualified as director at the Nigerian Civil Aviation Authority (NCAA)?

It is really very unfortunate. This is why it is important for Ministers to listen to those in the industry. But some of them do not take advice. You will call and call but they will not pick your call. But the truth of the matter is that such appointment is totally wrong and unacceptable in the aviation sector. I think the Minister needs to look at what he is doing so that he will not end up destroying the system and walk away. Because I know that if he leaves as Minister today he is not going to stay in the aviation industry. So the truth of the matter is that such appointment is not good at all. If you want to appoint anybody that can contribute meaningfully to the sector, the person needs to be properly profiled, and his documents checked not based on “I know you”. Take for example the appointment of General Manager of the Federal Airport Authority of Nigeria (FAAN). The Minister removed those that were there because he said they were appointed from outside. So if you want to appoint you should encourage those who are working within the system. We have tried this system before and it has helped. You don’t bring an outsider who does not have any stake in FAAN, NCAA, the Nigerian Airspace Management Agency (NAMA), the Nigerian Meteorological Agency (NIMET) and the Nigerian College of Aviation Technology (NCAT).

But if you leave people who are serving there and they know those places belongs to them and they walk in obviously they will perform better. And we need to encourage staff to be hard working people in order to achieve greatness. And I think that is what we should go back to.

Last year the existence of airlines was threatened by high price of aviation fuel and its scarcity, where do you think the industry is headed?

Well, frankly speaking the industry has been threatened by so many things, such as government policies, double taxation and by the time you start an airline there is nothing like tax holiday whereby they can give you some certain months for you to operate without paying any charges. For example, the day you do test flight, you buy fuel, you pay parking charges and every other thing and nobody will look at the investment you brought into the country and the job you have created.

The only thing the government is interested in is just how to collect taxes. For example it is only in aviation industry you are paying what they call VAT. Such taxes are not collected in other means of transportation, including rail, road, maritime. And I don’t know why the government must allow this kind of thing to happen. You pay 5 percent passengers’ service, and the 5 percent is being collected by the airline on behalf of the Nigeria Civil Aviation Authority (NCAA).

Later you add other charges on the ticket, thus giving so much financial burden to the airlines that are struggling to survive under the thriving hostile operational environment. It is these multiple taxes that have prompted the airlines to protest against NCAA. I suggest that airlines have to come together and talk to the National Assembly and other people who are stakeholders to look at it and address these issues in order to save the domestic carriers. Once you are doing business and there is no profit in it, it is just a matter of time that the business will go under. That is why we have average of 10 years survival of Nigerian airlines. In fact, everything seem to be pitted against the survival of airlines because the little money you collected to run your business, you still have to pay huge interest on it.

The previous attempt to get a bailout by some airlines which got it at the rate of two percent has been commended. But ironically, it was used to favour some airlines that had inclination to the ruling party then. Unfortunately some of the airlines did not utilise the money for what it was meant for, which is developing their airline business and carrying out manpower training. Some of them diverted the money.

This led to heavy loss of jobs as some of the airlines went under. Over 3000 staff both captain and engineers and cabin crew and other agencies like Nigerian Aviation Handling Company PLC (NAHCO), everybody lost job. And here we go again; Asset Management Corporation of Nigeria (AMCON) went to take over most of the airlines. What AMCON is doing again from the government circle is just like somebody taking a gun and going to rob a bank or somebody. They will come and take over your property. They will not do reconciliation. AMCON already has representatives in the companies they have taken over. When you appoint somebody to represent you in a company you are monitoring their activities, what are you expecting as your feedback? What you do you want him to do for you there? Is the purpose of your sending him there being achieved or not? So why come to take over the company?

At the end of the day they come in and take over your airline for nothing. I will give you a simple example, you can see an airline like Arik, some of the people may not agree with me but the truth of the matter is that you are talking about an airline that has more than 2000 staff. The owner is paying minimum, nothing less than N1 billion monthly as salaries. Now the government comes and says they are taking over, they took over and scattered the market, the industry and the airline. Can Arik under the government pay the salaries of over 2000 staff? It means almost 1500 staff must be sacked. In the past, Arik was recording about 120 landings and now they are recoding about 30 landings, so where will they generate money to pay about 2000 workers?

AMCON had argued that the airline owed workers before they took over, but the workers had hope that they would get their salaries, but what hope is there now? I thought that if anybody wants to do anything, they should have sat down and looked at it critically and see how they could have managed it. Government is supposed to manage the situation, manage the people but somebody will tell you that we took over because we wanted to revive it. How? You can’t even fly to anywhere, you can’t even fly international, but if you allow the person who knows how to get the money and put it together, he can give you a repayment schedule even if it is going to be in the next 30 or 50 years.

So I don’t know what the government is doing with this industry. Arik is out, it is now with the government, Aero is now with the government and there is nothing, no improvement everything is just going down. This is one of the major problems. In terms of fuel, the federal government has never helped the situation and that is why we are talking about double taxation. An airline operator pays for parking and at the same time he pays for passenger’s service charge to airport authorities. The same airport authority is also charging oil marketers.

The fuel marketer takes that bill up and adds it to the cost of aviation fuel, which the airline pays. So that is where the issue is, how much are they charging per litre? If they are charging you one naira extra, then if you save that one naira on every litre of fuel, do you know how much that will be?

In which ways can government step in now to salvage the industry?

First, what the Minister needs to do frankly speaking is that he needs to sit down with the operators. The Senate has to help because some policies need to be removed and the only way you can achieve that is through the Senate. The Senate has to come in. The operators will have to approach the Senate and demand that VAT b removed as part of the taxes paid by airlines. If we do that, it will help. Then we come back to fuel. The government must make aviation fuel available and ensure it is produced locally. They have to make sure that we produce aviation fuel in this country. The moment we have that then I believe that we are going to get the product cheaper. If there is any product that needs subsidy, it is aviation fuel, so the airlines need to have that.

Today you are buying fuel for over N250 per litre out of Lagos. Lagos is the cheaper, if you go to Abuja it is over N300 so how can you make it? The only option is that air ticket will rise to N40, 000 to N50, 000 and at that price, who is going to fly?

So the industry is dying. That is where the government needs to come in terms of fuel. Then you look at all those charges from FAAN, passenger’s service charge, landing and parking and so on. We sit down with the government to know which one we are going to pay and which one we are not going to pay. Because frankly speaking some of them cannot afford these charges, I think that was what led to the problem of Arik and the rest. So what do we do to get out of all these mess? What do we do so that airlines do not owe? So let’s tell ourselves the truth, the operators should tell themselves the truth and come out and sit down and agree to look at it totally. It is not a bailout, I am not talking about bailout what I am suggesting is that if the government wants to help they will come and look at your debt, when they look at your debt then they reconcile and agree on what you should pay. And say from today you start paying your current bill. If the government do this it will definitely help. This one has to do with either the airline is operating or the one that is not operating and is ready to come back. Then the government needs to check some of the official in the parastatal who are corrupt in the system and do away with them and bring in people who are not corrupt in order to move the industry forward.