Domestic Airfares May Exceed ₦1m If New Tax Laws Take Effect — AON Chairman Onyema Warns

Chairman and Chief Executive Officer of Air Peace Airline, Mr Allen Onyema, has warned that the implementation of the new tax laws scheduled to begin in January 2026 could push domestic airfares beyond ₦1 million and potentially force Nigerian airlines out of business.
He said the country’s domestic aviation sector is facing an imminent crisis, stressing that unless urgent steps are taken to reverse the policy, the industry could begin to collapse within months, with serious implications for passengers, financial institutions and the wider economy.

Onyema warned that if the tax reforms are implemented as planned, Nigerian airlines could shut down within three months, adding that economy class tickets could rise to about ₦1.7 million.
The Air Peace boss made these remarks during an interview on ARISE Television News on Sunday, December 28, 2025. He noted that Nigerian airlines are already burdened by excessive taxes, levies and charges, leaving operators struggling to survive while being wrongly portrayed as profiteers.
According to him, a significant portion of ticket revenue is lost to statutory deductions, leaving airlines with only a small fraction of what passengers actually pay.
“The Nigerian airlines are heavily overburdened by taxes, levies and all manner of charges. Take a ticket of about ₦350,000; what comes to the airline is about ₦81,000. Yet people talk as if airlines are making huge profits. That is not true,” he said.
Onyema criticised what he described as multiple and overlapping charges imposed on airlines, including a mandatory five percent deduction on every ticket sold.
“We are suffering multiple taxation and multiple charges. For instance, the NCAA alone takes five percent from every ticket sold. There are many other charges on top of that,” he explained.
He added that these charges ultimately reduce passenger demand and run contrary to international aviation standards. Citing the International Civil Aviation Organisation (ICAO), Onyema noted that airlines are not meant to serve as revenue generators for governments, but rather operate under a cost-recovery framework.
“Global aviation best practice, as outlined by ICAO, supports cost recovery, not revenue generation. You charge according to the cost of services rendered. The airlines are the ones suffering, and that is why they are not growing,” he said.
Onyema recalled that the 2020 tax law provided critical relief by removing Customs duties and VAT on imported aircraft, spare parts, engines and ticket fares.
“The 2020 Act removed Customs duties and VAT on imported aircraft, aircraft spares and engines, and also removed VAT on ticket fares. Even with those concessions, airlines were still battling numerous other charges across the country,” he said.
According to him, the new tax law has reintroduced those charges, making airline operations even more difficult.
“Now, the new tax law has brought all those taxes back. Buying an aircraft worth $80 million will now attract 7.5 percent VAT. Spare parts are also taxed. There is VAT on aircraft importation,” Onyema said.
He stressed that the combined impact of renewed taxation and high borrowing costs — with interest rates ranging between 30 and 35 percent — makes airline operations unsustainable.
“You bring in spare parts and pay 7.5 percent VAT. With borrowing costs at 35 percent, we are choking. You don’t run an airline that way,” he said.
Onyema warned that the financial burden would inevitably be passed on to passengers, leading to an unprecedented rise in domestic airfares if the policy is fully implemented.
“With this new tax regime, from January, ticket fares will soar. With 7.5 percent VAT on ticket fares, prices could hit ₦1.7 million,” he warned.
He disclosed that airline operators, under the umbrella of the Airline Operators of Nigeria (AON), have repeatedly presented their concerns to government authorities, including the National Assembly and the tax reform committee.
“We went to the National Assembly and laid out the facts. They were surprised by the level of burden on the airlines. We also met the government’s tax consultant and taskforce chairman, who listened to us and agreed to review the issues. He was genuinely worried,” Onyema said.
He described aviation as a catalyst for economic growth and national integration, warning that it should not be treated as a sector for short-term revenue extraction.
“One thing I credit this administration for is that the President is a businessman who does not want indigenous businesses to collapse. Globally, airlines are supported by governments. We are not asking for money. What we are asking for is a return to the 2020 Act, which respected aviation,” he said.
Onyema called for the removal of VAT on ticket fares and imported aircraft, and for the creation of a special window for airlines to access foreign exchange at affordable rates.
“At 35 percent interest rates, we are choking. You don’t do that to an industry like aviation,” he added.
He warned that failure to permanently amend the law could trigger a chain reaction, including airline failures and major losses for Nigerian banks that have financed aircraft acquisitions.
“If this tax reform is implemented, Nigerian airlines will go down within three months. Some will collapse within one month. Even the bigger ones may not survive beyond three months, and the banks will also suffer heavy losses,” Onyema said.
He expressed hope that the Federal Government would intervene, praising President Bola Ahmed Tinubu and key economic officials for previously responding promptly to industry concerns.