Airlines clamour for waivers in import duties tariff may have reached the ears of government once implementation of President Goodluck Jonathan’s 2013 budget proposal to the Joint Session of the National Assembly starts taking effect
President Jonathan presentation has been received as a relief to the aviation industry that has been crying for this waiver for years and most feel it is coming at a time when the industry recession has overwhelmed airlines and they are going out of business because of the harsh business environment.
Airline operators in Nigeria have over the years pleaded with successive government to assist them by sharply reducing the tariff they pay on the importation of aircraft, spares and rotables to assuage the high cost they incurred in their operations.
In March 2006 after the series of air crashes that bedevilled the aviation industry in Nigeria, Air vice Marshal Paul Dike had recommended that government should cancel the 5% Value Added Tax being charged on ticket and cargo as part of the palliatives sought for airline operators.
In the final report of the Presidential Task Force on Aviation Industry, the Paul Dike Committee recommended in paragraph 70 page xxvii, among others that,:” Government should grant custom duty waivers on aircraft spares, engines and test equipment. This would reduce financial burden on the airlines. It would also encourage good maintenance practices since spare parts would be more easily available. It would also remove the extra delay occasioned by cumbersome Custom procedures”.
This was ignored by subsequent government it was not implemented even after cries by airline operators peer group, the Airlines Operators of Nigeria
This declaration by the president, when it eventually comes on stream will be one of the palliatives for airline operators and will give a fresh of breath air and aid them in many ways to reduce their overhead cost.
The chief executive of Mish Aviation, West African Flying School in Ghana, Captain Ibrahim Mshelia, commended President Jonathan on the initiative stating that since Nigeria does not manufacture aircraft and spare parts, duty on such imported items should be waived as it has been done now.
“This is what obtains in Ghana today, and that is why we are able to successfully bring in all our training jets to Accra with little or no difficulty. Considering that Nigeria does not manufacture aircraft or spares, I recommend strongly for a 100% waiver on these imports in order to help indigenous airlines to be competitive with their global counterparts. Most competing airlines from Europe, North America and even some Asian countries do not need to spend additional money to ship and pay customs duty for such items. The young and very small Nigerian airlines can better compete if they enjoy such import duty waivers,” he said.
“This is a welcome development to the industry; I am so overwhelmed with happiness that this is finally happening in the Aviation industry. Airlines have cried for this for a long time now. The surprising thing about this to me however is the lack of reaction by stake holders after this laudable pronouncement. I was expecting a wide cross sectional jubilation at least to encourage the Government.”
“Zero duty will definitely assist operators in no small measures and I think the operators and stake holders are encouraged to also come out to praise the move. “
“I, on behalf of those who share my view, say it loud and clear that I thank Government for this effort and will remain grateful for all those who have worked to make government consider applying this zero duty. For example, if an airline was to buy an aircraft for $50 million for instance and the duty was only 2.5% which I think the ongoing tariff is more. The airline instead of looking for $1,250,000 to pay duty, will now convert that into other issues that will either support expansion or infrastructural development or whatever the airline wants. “
“This is something good. Also with spare parts, we can now enroll our aircraft cockpit (Avionics/ equipment’s and the aircraft itself on certain maintenance programs and enjoy same benefits as airlines in Europe and America do while enrolled on same maintenance support program. We now only have to contain with component shipping charges. In the past, you have free component from the program when yours fail, but when a new replacement is shipped to you, you had to pay duty on the original cost which was just killing and made the program totally senseless to a Nigerian Operator and the desired objective in the first place. “
“With this zero duty, we are left with shipping charges. What can be better? There are still a few issues that I believe if Government can be magnanimous as as in this case to also look into, Nigerian Aviation will reach its promise land within a very short time. These are: availability of Jet Fuel and the pricing regime, cost of handling and sundry matters which can be discussed amicably as partners between the Government and operators to mention a few.”
Alhaji Mohammed Tukur, the Assistant Secretary General, Airlines Operators of Nigeria (AON) lauded the announcement by President Goodluck Jonathan saying the this is what the AON has been fighting to achieve for the industry several years ago. ..
`This shows that the present administration is a listening one, concerned about the safety and security of its citizens and is thus doing the right thing. Granting zero tariff for the importation of new aircraft and spare parts is what is obtainable all over the world, ” Tukur said.
Tukur also commended the Minister of Aviation, Princess Stella Oduah, for supporting the cause that the AON has been fighting for and seeing it to reality.
Also, retired Capt. Dele Ore of the Aviation Round Table (ART), an aviation pressure group commended the announcement.
“We, at ART congratulate, the president on this noble gesture because in the 52 years of the existence of the aviation sector in Nigeria, this is the greatest and most vibrant decision to be taken by any administration,” Ore said.
He advised the Federal Government to set up a monitoring team that would ensure that operators do not import fake or substandard aircraft and spare parts into the country when the policy eventual comes on stream.
“With that, operators would not abuse the policy which I consider as the first major relief and waiver to be granted by the FG to improve the growth and development of the sector.
“ I think that the FG would think of coming up with other reliefs that would include the establishment of aircraft maintenance hangars in the country if this one is not abused,” he said.
Ore also a former pilot with the defunct Nigeria Airways Limited (NAL) suggested that the Nigeria Customs Service and the Nigeria Immigration Services (NIS) should be saddled with the responsibility of ensuring that genuine aircraft and spare parts are imported into the country under this new arrangement. .
“Through that both the aircraft operators and passengers would enjoy the benefits that would accrue for it such as reduction in passengers air fares, ” Ore said.
Over time, Nigerian airline operators have complained that they spend US$4 million on custom duties on acquired aircraft and have said that incurring such cost is not a plus to the airline’s survival.
Time and again the airlines in various fora have said that they feel the brunt of the numerous taxes on aircraft importation and spare parts and have called on Federal Government to abolish import duties on aircraft components
The managing director of Bristow Helicopters, Capt. Akin Oni who spoke in an interview said that until prohibitive charges and high cost of duty on aircraft and its spares are waived, airline business would remain unattractive.
“Payment on customs duty for aircraft and its spares only happen in Nigeria and nowhere else. A carrier pays an average of $4million on import duties on an aircraft. That is huge. “
“Aircraft are mobile resources that transport people around the world. This policy is killing the industry. “
“If you import an aircraft, you spend 14 per cent as import duties to the government which is about $4 million for just importing an aircraft. We are one among many other countries that enforce such laws; the same applies to spare parts. “
Managing director of Aero, Capt. Akin George said while the clamour for carrying out certain aspects of aircraft maintenance in the country is a ‘good idea’, the expected savings currently anticipated from doing the checks in Nigeria are quite little due to the current operating tax policy.
“Nigeria has relatively high import duties on aircraft parts. Airlines typically fly their aircraft to, say, Turkey to have them serviced and replace the relevant parts. Once that aircraft flies back to Nigeria, the new parts are not subject to import duties as they are already installed on the plane. This puts any Nigerian maintenance provider in a big disadvantage against foreign players. A Nigerian maintenance provider would need to import all spares used in maintenance and thus incur the import duties that those maintaining their aircraft abroad avoid completely. “