AON Urges NASS to Scrap 5% Aviation Charge, Adopt FAAN-Style Levy

Airline operators say percentage-based TSC has outlived its usefulness, worsened cost pressures and created an uneven playing field
The Airline Operators of Nigeria (AON) has called on the National Assembly to abolish the existing five per cent Ticket, Charter and Cargo Sales Charge (TSC), describing the percentage-based levy as an outdated funding mechanism that has become increasingly burdensome to domestic airlines.
Instead, the airline operators are proposing a fundamental restructuring of aviation financing, including the adoption of a fixed Passenger Service Charge (PSC)-style model similar to the system operated by the Federal Airports Authority of Nigeria (FAAN).
The association made the demand at a public hearing on the proposed revision of the statutory sharing formula for the 5 per cent TSC held at the House of Representatives.
Representing the AON at the hearing, former Managing Director of the Nigerian Airspace Management Agency (NAMA), Capt. Roland Iyayi, argued that the time had come for lawmakers to look beyond merely changing the distribution formula and address what he described as the fundamental weaknesses in the industry’s financing architecture.
According to him, retaining a percentage-based charge on airline earnings places an excessive burden on operators, particularly at a time when aviation fuel and other operating costs have risen sharply.
AON: 5% TSC has outlived its usefulness
The AON’s central argument is that the 5 per cent charge should no longer be calculated as a percentage of an airline’s earnings.
Iyayi said the association had already submitted proposals for a broader institutional reform of aviation funding and believed that the current debate provided an opportunity to redesign the system.
“The 5% service charge has outlived its usefulness. It has become a burden on domestic airlines,” he said.
Rather than applying a percentage levy to airline revenues, the AON wants the Federal Government to adopt a structure similar to FAAN’s Passenger Service Charge.
Under such an arrangement, passengers or users of aviation services would pay a defined charge rather than having airlines surrender a percentage of their revenue.
The association believes the model would create greater predictability for airlines and reduce distortions associated with the existing system.
Fuel crisis puts additional pressure on airlines
The AON’s demand comes against the backdrop of continuing pressure on airline operating costs, particularly aviation fuel.
The association told lawmakers that the increase in fuel prices had fundamentally altered the economics of domestic air transportation.
Iyayi claimed that while the average increase in aviation fuel prices in other parts of the world had been about 60 to 80 per cent, the increase experienced by Nigerian operators was significantly higher, which he put at about 270 per cent.
He said domestic airlines had struggled to remit the 5 per cent charge to the Nigerian Civil Aviation Authority (NCAA) since March, with operators increasingly relying on charter operations to remain viable.
“Since March, domestic airlines have not been able to pay the 5% to the NCAA. We have managed to remit only because domestic airlines are now taking on charter flights to pick up loads rather than continuing scheduled flights,” he said.
The AON said fuel now accounts for roughly 40 per cent of an airline’s operating costs, meaning that a significant proportion of ticket revenue is being absorbed by fuel expenditure before other operational obligations are considered.
For the operators, the argument is therefore not simply about the amount being paid to the regulator but whether the current percentage-based mechanism remains sustainable in an industry facing rising costs and narrow operating margins.
AON questions utilisation of aviation-generated revenues
Beyond the TSC, the AON also raised broader questions about how revenues generated from aviation-related charges are collected, distributed and utilised.
The association particularly pointed to fees collected by the NCAA on telecommunications masts and other structures erected within Nigeria’s airspace.
According to the AON, the collection of mast-related fees is linked to the need for accurate geolocation information that would enable NAMA to develop low-level navigation charts.
However, the association argued that the expected infrastructure has not been adequately delivered.
It claimed that the absence of sufficient low-level navigation charts has restricted the use of significant portions of Nigerian airspace, particularly for helicopter operations at night.
The implication, according to the AON, is that airlines are unable to maximise the utilisation of aircraft assets.
Aircraft utilisation remains below potential
The association said aircraft capable of operating between eight and 10 hours daily are, in some cases, being utilised for only about six hours because of infrastructure and operational limitations.
Such under-utilisation, it argued, represents an economic loss not only to airlines but also to the wider aviation industry.
More aircraft utilisation means more passenger capacity, greater connectivity, increased employment and potentially higher government revenues.
But where infrastructure limitations restrict operating hours and routes, the capacity of airlines to generate revenue is correspondingly constrained.
The AON therefore argued that aviation financing should be tied directly to measurable improvements in infrastructure and operational capacity.
N10bn mast fees allegation raises accountability questions
The association further alleged that the NCAA has collected more than N10 billion over the past 20 years from mast application fees and similar charges.
Iyayi argued that the funds should be accounted for and, where necessary, redirected towards the infrastructure for which such charges are intended.
“As we speak, helicopters in this country cannot conduct what is called low-level flight at night, and most of our airspace, because we lack low-level navigation charts, can scarcely be used,” he said.
The claim raises a wider question about the relationship between aviation-related charges and the infrastructure they are intended to support.
If operators and other aviation stakeholders are required to pay specific charges for regulatory or navigational services, the AON believes there should be greater transparency regarding how such revenues are deployed and whether the corresponding services are delivered.
AON backs NAMA revenue reform — but wants a bigger solution
While supporting the proposed legislation seeking to increase NAMA’s share of aviation-generated revenues, the AON cautioned lawmakers against treating the TSC-sharing formula as an isolated issue.
The association wants the National Assembly to undertake a comprehensive review of aviation funding.
Its proposal is for aviation-related revenues currently flowing into the Consolidated Revenue Fund and subsequently managed through the Treasury Single Account (TSA) framework to be consolidated into a dedicated pool for the development of the aviation sector.
Proposed Aviation Development Fund
The AON proposed the creation of an Aviation Development Fund, into which aviation-related revenues could accrue.
Under the proposed framework, funds accumulated in the pool could be deployed for critical infrastructure, navigation systems, safety facilities and other sector-wide development priorities.
The association believes such an arrangement could provide a more sustainable financing mechanism for aviation infrastructure while reducing dependence on annual budgetary allocations.
It also argued that the aviation industry generates sufficient revenues to support a dedicated development fund.
According to Iyayi, if the NCAA can remit about N500 million annually to the government and still remain profitable, it suggests that the sector generates enough surplus to support a properly structured aviation development mechanism.
Who benefits most from the proposed reform?
The fundamental question arising from the AON proposal is whether the proposed restructuring would benefit airlines alone or the entire aviation ecosystem.
For airlines, the immediate benefit would be relief from a percentage-based levy that rises automatically with revenue.
For passengers, a more transparent and predictable charge could potentially make aviation pricing easier to understand, although the ultimate impact on ticket prices would depend on how airlines and regulators implement the new system.
For government agencies, a dedicated aviation fund could provide a more predictable source of financing for infrastructure.
For NAMA and other aviation service providers, improved funding could support navigation systems, surveillance infrastructure and other operational facilities.
And for the wider economy, better utilisation of aircraft and airspace could improve connectivity, stimulate tourism and trade, create jobs and strengthen Nigeria’s position as a regional aviation hub.
But transparency must accompany new funding model
The AON’s proposal also raises an important governance question: who would control the proposed Aviation Development Fund, and how would Nigerians know that the money was being spent as intended?
Creating another pool of aviation revenues without strong accountability mechanisms could simply reproduce the problems the association is criticising.
Any new framework would therefore need clear rules on revenue collection, allocation, reporting, auditing and project delivery.
There would also need to be measurable performance indicators showing how much is collected and what infrastructure is delivered from the funds.
From revenue sharing to aviation reform
The public hearing may therefore become more significant than a simple debate over how the existing 5 per cent TSC should be shared among aviation agencies.
The AON is effectively asking lawmakers to reconsider the entire philosophy of aviation financing.
Its position is that Nigeria should move away from a system in which airlines are charged a percentage of earnings and towards a model where aviation users contribute predictable charges while revenues are reinvested in the infrastructure required to make the industry more efficient.
At the heart of the proposal is a simple argument: aviation charges should ultimately translate into better aviation services.
For domestic airlines struggling with fuel costs, infrastructure limitations and intense operating pressures, the reform could provide much-needed relief.
For regulators and government, however, the bigger challenge will be ensuring that any new funding architecture produces measurable improvements in safety, navigation, infrastructure and passenger experience.
The National Assembly now has the opportunity to decide whether the proposed review should remain a narrow adjustment to the TSC-sharing formula or become the beginning of a broader overhaul of Nigeria’s aviation financing system.
For the AON, the message is clear: the 5 per cent TSC has served its purpose, and Nigeria’s aviation industry needs a new funding model built around fairness, efficiency, transparency and reinvestment.