Multiple taxation, interest rate hikes affecting airlines, says Aero Contractors MD

Ado Sanusi, managing director (MD) of Aero Contractors, says airlines are struggling due to multiple taxation and interest rate hikes in the aviation industry.

Speaking to journalists on Tuesday, Sanusi said airlines are burdened by multiple taxes as they attempt to fund the services provided by aviation parastatals.

He acknowledged the efforts made to assist airlines but emphasised that more needs to be done to ensure their survival and growth.

“The cost of running an airline in this country is high. We should address the multiple taxation. That should be addressed. As a country, I think we should make deliberate efforts to see that airlines survive. We should understand the reason the airlines are struggling and the reason is very simple, multiple taxation,” Sanusi said.

“Because the airlines are trying to support or to pay for the services the parastatals are giving and I don’t think the airlines can fund the parastatals so there must be another source of funding for the parastatals because the airlines are struggling and the parastatals too are struggling to provide these services and again, with the 50 percent deduction in the aviation industry, I think it is affecting us most and I believe that it should be looked at.”

The MD said the aviation sector should not be viewed as a revenue source but as a catalyst for economic growth.

According to Sanusi, if the federal government prioritises revenue generation from aviation, it undermines the industry’s true purpose.

“But if it is looking at aviation as an enabler to economic growth and foreign direct investment, then you can see the growth,” he added.

‘HIGH INTEREST RATE STIFLING AVIATION GROWTH’

While commending the implementation of the Cape Town Convention, which facilitates access to aircraft leasing and financing, Sanusi noted that high interest rates remain a major obstacle to the growth of the aviation sector.

“Cape Town Convention is quite commendable but it is just a part of ingredients that are needed for the aviation’s growth. Why do I say that? We have Cape Town Convention so that means that airlines can borrow money and lease finance to the aircraft but there is a key factor here and that is the interest rate,” he said.

“The cost of funding in this country is very low. Recently, they just increased the MPR and that is stifled growth in aviation. I can’t see any airline going to borrow money at 33-35 percent and then make profit.

“I can’t see 90 percent of companies that provide spare parts… they borrow money and that is showing in the prices so it is actually affecting the growth of aviation industry.”

The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR), which benchmarks interest rates in the country, to 27.50 percent — from 27.25 percent.

MPC said the MPR was raised to address price developments.

Also, Sanusi praised the current administration’s move to unify exchange rates, which he said has benefited the sector by ensuring fair access to foreign exchange.

He added that the policy has encouraged airlines to conduct maintenance, repairs, and overhauls (MRO) locally, but stressed the need to further develop local capacity.

“Look at the maintenance that the airlines would have taken out of the country. They now come to us for skill repairs. Some of the capabilities we have to build. We have to start building that capacity. So, yes, the unifying of the dollar exchange rate has helped to build our MRO,” Sanusi said.

On June 14, 2023, the CBN announced the unification of all segments of the forex exchange (FX) market.

The apex bank said all FX windows are now collapsed into the investors & exporters (I&E) window.