…Seeks N50bn bailout for airlines
…Decries Customs’ non-execution of executive order waiving taxes on aircraft parts
By Henry Umoru & Tordue Salem
THE two chambers of the National Assembly, yesterday, decried the state of the aviation sector, warning that disaster looms without adequate funding. Specifically, the legislators said at least the sum of N50 billion was needed to meet the requirements of airline operators.
Addressing journalists yesterday on the outcome of the public hearing held between November 2 and November 4, 2020 in the course of passing six Executive Bills, Chairman, Senate Committee on Aviation, Senator Smart Adeyemi, All Progressives Congress, APC, Kogi West, warned that there was danger in flying in Nigeria today.
The Senate said it discovered during the three days public hearing on the bills that part of the challenges confronting the Aviation sector was the fact that the Customs has not complied with the executive order to waive any form of taxation on importation of spare parts on commercial aircraft.
V He also said it was discovered that multiple forms of taxation still persist, as well as non-compliance with the executive order on removal of Value Added Tax, VAT, from air transport, and inability of airline operators to have access to single digit lending, as obtainable in other parts of the world.
According to the Senate, an approximate sum of N50 billion will be required to meet critical requirements of airline operators, compared to the paltry sum of N4 billion naira available as a bailout to them. Adeyemi said: “I want to put it on record that there is danger in flying in Nigeria today. There are instances of some planes skidding off the runway.
“We must support the airline operators pending when we have our own national carrier. But if we want to continue with the operators like most nations are doing today, we cannot afford to leave them on their own, because they will want to be in business and struggle to make profit, and by extension, they will be cutting corners.
“You would recall that the federal government, having considered impacts of the pandemic on the aviation industry, with a view to maintaining smooth operations, made the sum of N4 billion naira available as a bailout to these airline operators.
“With further and more critical intervention with airline operators in Nigeria, we gathered that approximately N50 Billion will be required to meet the requirements of airline operators. This increase in bail fund is imperative if we are to keep our economy running, guarantee job security and mitigate retrenchment.
“A critical look at the aviation industry in Africa, Senegal for instance which is no competition for the Nigerian Aviation industry in terms of number of airline operators etc, released a sum of $74 million dollars as bail out funds for their Airline Operators. Rwanda also released $150 million dollars for its airline operators. Taking the scope out of Africa, America for instance released the sum of $58 billion dollars as bailout funds for its airline operators. This is to mention a few.
“If comparative analysis ‘is anything to go by, it is clear that the N4 billion naira announced by the Federal Government as bailout funds for airline operators will not be sufficient to sustain three of the needs of the 15 scheduled flight operators, save the non scheduled operators…
“Our further enquiry has also shown that airline operators are already discouraged and have resorted to cutting corners in carrying out maintenance requirements on their aircraft. This is of course as a result of their poor financial situation. If this is not immediately checked, the effect is best not imagined.’’
More definitely has to be done to help the airlines respond to the impact of Covid-19 pandemic. As Legislators, we strongly advise the Nigerian Government to run a tax free, VAT free process for all spare parts and commercial aircraft being imported to Nigeria. This will help in accelerating economic growth even in the face of a recession confronting nations of the world today, while helping the airlines stay afloat with an end goal of ensuring the safety of passengers.’
’Reps canvass N50bn bailout, 10 years exemption from remittances
In like manner, the House of Representatives Committee on Aviation, urged the Federal Government to provide at least N50 billion, as intervention fund for airlines operating in the country.
It also urged President Muhammadu Buhari to urgently make a pronouncement allowing aviation agencies to retain 25 per cent of their internally generated revenue for infrastructure development.
The committee spoke at a press conference anchored by its Chairman, Nnolim Nnaji (PDP-Enugu).
“The Aviation sector requires huge capital for infrastructural development. The remittances of 25 per cent of their internally generated revenues(IGR), should be retained for the next 10 years, to help the agencies upgrade their facilities.
“The federal government’s N4blllion bailout to the airlines and some palliatives to the agencies (not yet released), is too small. The airlines need at least N50billion bailout funds, to cushion the Corona virus effect,” he stated.
The committee also warned of an impending collapse of the sector, if its concerns were not urgently addressed.
He said: “We are requesting that other mechanisms should be introduced as a support, to avert the collapse of the Aviation sector. We intend to interact with the leadership of The National Assembly and the Ministry of Aviation over the concerns raised by the operators and other sundry issues confronting the industry, to see how we can address them, to avert the collapse of the industry.
“it is important that the Federal government urgently comes to the aid of the operators by addressing these needs in the overall interest of the national economy to relieve the airline operators of frustration as well as their threat of shutting down operations due to lack of funds and harsh operating environment.”
The committee said the sector’s contribution to the economy was too enormous to allow it fail.
“In 2019, the contribution of the aviation industry to the nation’s Gross Domestic Product, GDP, was put at N198.62billion according to the release from the National Bureau of Statistics, NBS.
‘’In fact, aviation was adjudged the fastest growing sector in 2019, despite the harsh operating environment.
‘’This was projected to be surpassed in 2020, but for the advent of Corona virus pandemic, which has dealt a devastating blow on the industry.
“Before the outbreak of COVID-19, the industry, especially the airlines were already crying for intervention from the government to help them surmount the various challenges confronting them.
‘’The public hearing we held for the six aviation bills, between November 17 and 19, provided the ample opportunity for indigenous airline operators to voice out their problems, which we believe should not be treated with levity, if we must move the industry and the economy forward.
“The operators listed the challenges crippling their operations as follows: non-implementation of Executive Order on Zero Customs Duty and zero VAT on importation of Commercial Aircraft and Aircraft spare parts, non-implementation of the Executive Order on the removal of VAT from Air Transportation, inability to access foreign exchange, high cost of capital and lack of single digit lending interest rate for airlines, replacement of NCAA’s 5 per cent Ticket Sales Charge (TSC), with fixed charge similar to FAAN passenger service charge (PSC), multiplicity of taxes, fees and charges among others.’’