NCAA, Airlines Face N20 Billion Debt Impasse

The Aviation Round Table (ART), a prominent Nigerian industry think-tank, has intervened in a critical financial dispute between domestic carriers and the Nigeria Civil Aviation Authority (NCAA). The impasse centers on over N20 billion in unremitted Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC), statutory levies that airlines are mandated to collect on behalf of the regulator under the Civil Aviation Act.

The Financial Crisis Behind the Debt

The debt accumulation accelerated as domestic airlines struggled with a severe surge in operating costs. According to the Airline Operators of Nigeria (AON), the price of Jet A1 aviation fuel climbed from N900 per litre to as high as N3,500 per litre following geopolitical tensions in the Middle East. To maintain flight operations, carriers were forced to secure high-interest commercial loans, often at rates reaching 30%, leaving little liquidity to remit the 5% regulatory charges to the NCAA. This has led to a recurring cycle of debt and disruptive "no-pay, no-service" regulatory standoffs.

Structural Flaws and Regulatory Friction

In its advisory note 6A/26, the ART highlights that the current ad valorem percentage model is fundamentally flawed. Under this system, airlines act as unpaid tax collectors, absorbing merchant processing fees of 1.5% to 2.5% on funds that do not belong to them. Furthermore, airlines argue that the percentage-based model violates the International Civil Aviation Organization (ICAO) principle of cost-relation, as outlined in ICAO Doc 9082. Carriers contend that since all passengers consume the same safety infrastructure, assessing fees based on fare tiers is discriminatory.

Additionally, the NCAA faces revenue leakage due to "fare unbundling." By keeping base fares low and layering on surcharges for fuel and ancillaries, airlines minimize the 5% levy, which applies only to the base fare. This creates an administrative burden for the regulator, which must conduct costly audits to recover the difference.

Proposed Automated Solution

The ART proposes a transition to a flat-rate passenger charge, coupled with an automated split-payment architecture. Under this model, Application Programming Interfaces (APIs) would execute a real-time financial split at the moment of booking. The fixed regulatory fee would be swept directly into the Treasury Single Account (TSA), while the base fare is routed to the airline. This system would eliminate the need for manual reconciliation and ensure the regulator receives its funds instantly, regardless of airline pricing strategies.

Historical Context and Industry Precedent

This situation mirrors the 2016 shift by the Federal Airports Authority of Nigeria, which moved to direct collection of Passenger Service Charges following similar debt impasses. Globally, the struggle to capture tax revenue from unbundled airline fares is a documented trend, as seen in U.S. markets where carriers have historically shifted revenue to ancillary fees to avoid excise taxes. The ART's proposal aims to modernize the Nigerian regulatory framework by decoupling airlines from the tax custody loop, thereby improving cash flow for both the regulator and the operators.