The Chairman and Chief Executive Officer of Air Peace, Allen Onyema, has warned that domestic economy airfares could climb above N1 million from next year.
He made this known during an interview on The Morning Show on Arise News on Sunday, linking the possible hike to the upcoming implementation of the new tax reform laws set to take effect from January 2026.
According to him, the laws remove several tax exemptions previously granted to airlines under the 2020 Finance Act, which had helped reduce operating costs.
Onyema said the removal of these incentives would sharply increase the cost of operations, forcing airlines to pass the burden onto passengers.
Onyema explained that the new tax reform reintroduces Value Added Tax (VAT) on aircraft, spare parts, and air tickets, which were previously exempted under the 2020 Finance Act.
He noted that, for instance, airlines importing aircraft valued at around $80 million would pay 7.5 per cent VAT, adding billions of naira to costs.
He added that Nigerian airlines already operate in a high-cost environment, with borrowing rates of up to 35 per cent, making it impossible to absorb the added expenses. Onyema also cited the International Civil Aviation Organization (ICAO) annex, which states that VAT should not be charged on air transportation services.
He warned that if the law is implemented in 2026, economy-class fares could rise significantly.
“By the time you bring these things in, at the end of the day, the cost of operation will be huge… your ticket fares will hit N1. something million soon,” Onyema said.
He further stressed: “If we implement that tax reform, Nigerian airlines could go down within three months.”
He clarified that the increase reflects operational costs, not profiteering, and argued that aviation should be supported to ensure connectivity and economic growth.
Beyond the upcoming tax reforms, Onyema highlighted persistent challenges facing Nigerian airlines, including high fuel costs, foreign exchange constraints, and multiple statutory charges.
He explained that for a domestic ticket costing around N350,000, only about N81,000 actually goes to the airline, with the rest consumed by taxes, levies, and other charges.
Onyema pushed back against claims that airlines overcharge passengers, stressing that Nigerian domestic fares remain among the cheapest globally when converted to dollars. He also noted that several domestic routes—particularly to the Southeast—are barely profitable, as aircraft often return with few passengers.
He addressed criticism over flight delays and cancellations, pointing out that many disruptions are caused by factors outside airlines’ control, such as bird strikes, limited airport infrastructure, and errors by ground handling companies.
Onyema warned that without supportive policies and reforms, the sustainability of Nigeria’s aviation sector could be at serious risk in the coming years.
For years, Nigerian airlines have complained about the heavy burden of taxes, levies, and charges that eat into their revenue. Earlier in December 2025, an additional $11.5 security levy under the Advance Passenger Information System (APIS) took effect, raising the total charge on international tickets to $31.50.
However, under a 2024 agreement by ECOWAS member countries, all air ticket taxes across the sub-region are set to be abolished from January 1, 2026, in a bid to reduce fares and boost regional connectivity.
In 2024, data from the International Air Transport Association (IATA) showed that Nigeria earned $62 million from airline ticket taxes, part of $1.97 billion collected across Africa.
From 2026, the aviation sector and passengers will be watching closely to see how ECOWAS’ reforms fit into Nigeria’s system and whether they ease airlines’ high operational costs.
