Tax reforms may push domestic airfares above N1m in 2026 —Onyema

The Chairman and Chief Executive Officer of Air Peace, Mr. Allen Onyema, has cautioned that domestic economy airfares in Nigeria could rise above N1 million from 2026, should the proposed tax reform laws be fully implemented as scheduled.

Onyema raised the alarm during an interview on The Morning Show on Arise News on Sunday, where he linked the looming fare hike to the new tax reform laws set to take effect from January 2026.

According to him, the reforms would roll back several tax exemptions previously granted to airlines under the 2020 Finance Act, exemptions that had significantly reduced operating costs within the aviation sector.

He explained that the new laws would reintroduce Value Added Tax (VAT) on critical aviation components such as aircraft, spare parts, and air tickets, which had been exempted under the 2020 legislation.

Onyema warned that this reversal would dramatically increase airlines’ operating expenses, inevitably forcing carriers to transfer the burden to passengers.

Providing an example, Onyema said an aircraft valued at about $80 million would now attract 7.5 percent VAT, translating into billions of naira in additional costs.

He noted that Nigerian airlines already operate in a highly challenging environment, with borrowing rates as high as 35 percent, making it unrealistic for operators to absorb such added financial pressure.

He also referenced provisions of the International Civil Aviation Organization (ICAO) annex, which stipulate that VAT should not be imposed on air transportation services. Despite this, Onyema warned that if the reforms proceed as planned, the consequences for air travelers would be severe.

“By the time you bring these things in, at the end of the day, the cost of operation will be huge. Your ticket fares will hit N1.something million soon,” he said.

He further warned that the survival of Nigerian airlines could be at stake, stressing, “If we implement that tax reform, Nigerian airlines could go down within three months.”

Onyema was quick to clarify that any fare increase would be driven purely by operational realities rather than profiteering.

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He argued that the aviation sector should be deliberately supported by government policy, given its critical role in national connectivity, trade, and economic growth.

Beyond the impending tax reforms, Onyema highlighted long-standing challenges confronting Nigerian airlines, including high aviation fuel costs, foreign exchange constraints, and multiple statutory charges imposed by various agencies.

He disclosed that for a domestic ticket priced at around N350,000, only about N81,000 actually accrues to the airline, with the remainder swallowed by taxes, levies, and regulatory charges.

He pushed back against claims that airlines overcharge passengers, insisting that Nigerian domestic airfares remain among the cheapest globally when converted to dollars.

According to him, several domestic routes—especially flights to the Southeast—are barely profitable, as aircraft often return with low passenger loads.

Addressing public criticism over frequent flight delays and cancellations, Onyema noted that many disruptions stem from factors beyond airlines’ control, including bird strikes, inadequate airport infrastructure, and lapses by ground handling companies.

He warned that without policy reforms and a more supportive regulatory framework, the long-term sustainability of Nigeria’s aviation industry could be seriously threatened.

For years, domestic airlines have complained about the heavy burden of taxes and charges eroding their revenues. In December 2025, an additional $11.5 security levy under the Advance Passenger Information System (APIS) came into effect, pushing total charges on international tickets to $31.50.

As 2026 approaches, stakeholders in the aviation industry and traveling public alike will be closely watching how Nigeria aligns with ECOWAS’ tax reforms and whether these measures will ultimately ease the high cost of operating airlines in the country.