New Tax Law: Air Peace CEO Reveals Airfares May Hit N1 Million For Domestic Flights
- Nigeria's aviation industry faces crisis as new tax provisions threaten soaring flight fares and airline operations
- Air Peace CEO Allen Onyema calls for urgent government intervention to prevent sector collapse and limit fare increases
- New tax framework could push economy-class fares to a new high impacting passengers and the economy significantly
Nigeria’s domestic aviation industry is heading into turbulent airspace as new tax provisions threaten to push local flight fares beyond ₦1 million and force airlines to suspend operations.
This warning came from Allen Onyema, Chairman and Chief Executive Officer of Air Peace, who said urgent government intervention is needed to avert a sector-wide crisis.
Source: UGC
Speaking on ARISE NEWS, on Saturday, December 27, 2025, Onyema painted a grim picture of an industry already stretched thin by taxes, levies and rising operational costs. He warned that the cumulative burden could trigger a collapse with serious consequences for passengers, lenders and the wider economy.
“Airlines are not making a kill”
Onyema dismissed the widespread belief that Nigerian airlines are profiteering from high ticket prices. According to him, a large portion of ticket revenue never gets to operators.
“Take a ticket of about ₦350,000. What comes to the airline is about ₦81,000,” he said, stressing that deductions and statutory charges swallow most of the fare.
He singled out the mandatory five per cent deduction paid to the Nigerian Civil Aviation Authority (NCAA) on every ticket, describing it as just one of many overlapping charges.
Multiple charges, shrinking demand
Beyond NCAA fees, Onyema said airlines are hit by several other levies that collectively reduce passenger demand and stifle growth.
He argued that this approach contradicts international best practice, noting that the International Civil Aviation Organisation (ICAO) recommends cost recovery rather than revenue generation.
“You charge according to the cost of the services you render. That’s not what is happening here, and that’s why airlines are not growing,” he said.
Relief lost after 2020 reforms
The Air Peace boss contrasted the current tax framework with the relief provided under the 2020 Finance Act, which removed customs duties and VAT on imported aircraft, spare parts, engines and ticket fares.
That policy, he said, gave airlines breathing space and helped stabilise operations.
Under the new law, however, aircraft purchases and spare parts are once again subject to 7.5 per cent VAT. Onyema said this reversal could be devastating, especially when combined with Nigeria’s high borrowing costs.
Borrowing at 35%, taxed at 7.5%
Using the example of an $80 million aircraft purchase, Onyema explained that airlines already borrow funds at interest rates of between 30 and 35 per cent.
Adding VAT on aircraft and spare parts, he said, makes survival nearly impossible.
“At 35 per cent interest, we are choking,” he said, warning that airlines would inevitably pass the cost to passengers.
Fares set to explode
Onyema said enforcement of the new tax regime from January could push economy-class fares to unprecedented levels.
He warned that if VAT is applied to ticket fares, domestic flight prices could skyrocket, effectively pricing most Nigerians out of air travel.
“If we implement that tax reform, Nigerian airlines will go down in three months. Some will go down in one month,” he said, adding that banks heavily exposed to the sector would also feel the shock.
Calls for urgent government action
The Airline Operators of Nigeria, Onyema said, has repeatedly raised these concerns with the National Assembly and tax reform committees, with lawmakers reportedly alarmed by the data presented.
Source: Getty Images
Despite the warning, Onyema acknowledged the federal government’s past responsiveness, praising President Bola Tinubu’s willingness to listen to industry stakeholders.
He urged a return to the 2020 tax framework, warning that the cost of inaction could be catastrophic for Nigeria’s aviation sector and economy.
Air Peace sends message to passengers about night flights
Legit.ng earlier Air Peace has announced a major operational change across its West African network, confirming that it will transition most regional flights from night-time to daytime operations starting February 2, 2026.
The decision, communicated directly to passengers, marks a significant shift in how the airline manages short-haul international routes within the region.
According to the airline, the move is part of a broader strategy to improve passenger experience, enhance punctuality, and better align regional flights with onward domestic and long-haul connections, especially from Lagos, which remains Air Peace’s primary hub.
Source: Legit.ng
