N20bn Debt: Operators Insist NCAA Collect 5% Ticket Sales Charge from Travellers

The Airline Operators of Nigeria (AON) has reignited calls for the Nigeria Civil Aviation Authority (NCAA) to directly collect the statutory 5% Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC) from air travellers, rather than through airlines. This demand stems from a significant N20 billion debt owed to the NCAA by domestic carriers, which AON attributes to the current collection model and the severe financial strain on airlines. While the NCAA acknowledges the possibility of such a change, it maintains that the existing legal framework mandates airlines to collect and remit these charges, and insists on the settlement of outstanding debts. This article examines the legal basis of the TSC, the contentious issues surrounding its collection, and the implications of AON's proposed shift for the Nigerian aviation sector.

The Nigerian aviation sector is once again grappling with a contentious financial dispute, as the Airline Operators of Nigeria (AON) has intensified its insistence that the Nigeria Civil Aviation Authority (NCAA) assume direct responsibility for collecting the 5% Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC) from passengers. This renewed call comes amidst a staggering N20 billion debt owed to the NCAA by domestic airlines, a situation that has severely hampered the regulator's operational capacity and ability to fund critical projects and staff allowances.

The current collection mechanism, which places the onus on airlines to collect these charges from ticket sales and remit them to the NCAA, has been a persistent point of friction. AON argues that this model is unsustainable for financially distressed carriers and contributes directly to the accumulation of unremitted funds. The operators propose a fundamental shift in the collection process, advocating for a direct collection system by the NCAA, similar to models employed by other aviation agencies.

This article delves into the legal framework governing the 5% TSC, analyses the arguments put forth by AON and the NCAA, and explores the potential legal and operational implications of a change in the collection methodology. It aims to provide legal professionals with a comprehensive understanding of this critical issue impacting the financial stability and regulatory compliance within Nigeria's aviation industry.

The statutory basis for the 5% Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC) is firmly rooted in the Nigerian Civil Aviation Act 2006. Specifically, Section 12(1) of the Act mandates that there "shall continue to be a 5% air ticket contract, charter and cargo sales charge to be collected by the airlines and paid over to the Authority." This provision clearly designates airlines as the primary collectors of these charges, acting as agents for the NCAA. The funds generated from the TSC are crucial for the sustenance and development of the Nigerian aviation sector, with the Act stipulating a sharing formula among key aviation agencies, including 58% for the NCAA, 23% for the Nigerian Airspace Management Agency (NAMA), 9% for the Nigerian Meteorological Agency (NIMET), 7% for the Nigerian College of Aviation Technology (NCAT), and 3% for the Accident Investigation Bureau (AIB).

Historically, the collection of these charges has been a recurring source of dispute between the NCAA and airline operators. The NCAA's Department of Commercial and Statistics has a system in place, with staff stationed at airports, to capture data from flown coupons and passenger manifests to ensure accurate billing of airlines. Despite these mechanisms, the issue of unremitted charges has led to substantial debts, with reports indicating figures in the region of N20 billion owed by various domestic carriers to the NCAA and other aviation agencies. This chronic indebtedness has reportedly led to severe fiscal constraints for the NCAA, impacting its ability to meet financial obligations, including staff allowances and project execution.

In response to persistent non-remittance, the NCAA has previously implemented measures such as a 'pay-as-you-go' system and, more recently, engaged AON on the implementation of Advance Payment Guarantees (APG) for the 5% TSC, though a 90-day deferment was granted. The Authority also issued a 'no-pay-no-service' directive against several airlines over alleged outstanding statutory remittances, which was later temporarily suspended following stakeholder consultations. These actions underscore the NCAA's efforts to enforce compliance within the existing legal framework.

The core of the current dispute lies in the interpretation and practical application of Section 12(1) of the Civil Aviation Act 2006. While the Act explicitly states that the charge is "to be collected by the airlines and paid over to the Authority," AON argues that the financial burden of this collection model, coupled with the economic realities of airline operations, makes it untenable. Airlines contend that they are essentially acting as unpaid tax collectors, deducting the charges from their revenues before remitting to the regulator, a process that becomes increasingly difficult amid high operational costs, such as exorbitant fuel prices and foreign exchange pressures.

AON's proposal for the NCAA to collect the 5% TSC directly from travellers, potentially through a flat-rate charge or a sticker model akin to the Federal Airports Authority of Nigeria (FAAN)'s Passenger Service Charge (PSC), presents a significant legal and logistical challenge. While the Director of Public Affairs and Consumer Protection for NCAA, Michael Achimugu, acknowledged the possibility of direct collection, he stressed that it would require a change in the existing law. This highlights a critical legal hurdle: any shift in the collection mechanism would necessitate legislative amendment to the Civil Aviation Act 2006, as the current statute clearly assigns the collection responsibility to airlines.

Furthermore, AON has challenged the NCAA's claims of indebtedness for regulatory services, asserting that airlines typically pay for such services upfront. They distinguish between payments for specific regulatory services and the 5% TSC, arguing that the latter is a passenger charge that, by international standards, should be commensurate with the cost of providing services, not a general revenue-generating tool for the government. This distinction raises questions about the transparency and allocation of TSC funds, particularly if they are perceived to be diverted to non-aviation government expenditures rather than strengthening airline operational capacity or aviation infrastructure.

The NCAA, on its part, maintains that the 5% TSC is a passenger charge and not a burden on airlines, and that operators are merely entrusted with its collection. The Authority's insistence on the settlement of the N20 billion debt before considering any changes to the collection method underscores its position that airlines have a legal obligation to remit the collected funds. The introduction of Advance Payment Guarantees (APG) by the NCAA, though deferred, signals a move towards strengthening compliance and ensuring timely remittances, indicating the regulator's commitment to enforcing the current statutory provisions. The ongoing impasse highlights a fundamental disconnect between the legal mandate and the practical realities faced by airline operators, necessitating a comprehensive review of the regulatory framework to ensure both compliance and industry sustainability.

The ongoing dispute between the Airline Operators of Nigeria and the Nigeria Civil Aviation Authority over the N20 billion debt and the collection of the 5% Ticket Sales Charge presents a complex challenge for the Nigerian aviation industry. For legal practitioners advising airlines, the immediate implication is the imperative to ensure compliance with the existing provisions of the Civil Aviation Act 2006, which places the responsibility for collection and remittance squarely on the operators. While AON's call for direct collection by the NCAA has merit from a commercial viability perspective for airlines, any such change would require legislative amendment, a process that can be protracted and politically charged.

Practitioners should closely monitor any proposed amendments to the Civil Aviation Act or new regulations issued by the NCAA concerning the TSC and CSC. Furthermore, the NCAA's stance on prior debt settlement before considering new collection models means that airlines must engage proactively in reconciliation and payment plans to mitigate potential sanctions, such as the 'no-pay-no-service' directive. The situation underscores the critical need for a sustainable and transparent funding model for aviation regulation in Nigeria, one that balances the financial health of airlines with the operational requirements of regulatory agencies. A collaborative approach involving all stakeholders, potentially leading to a review of the Civil Aviation Act, is essential to foster a stable and compliant aviation environment.