Matters Arising From Automation of Remittances (NCAA)

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Last week the Nigerian Civil Aviation Authority (NCAA) gave final ultimatum to airlines to automate their remittances of the statutory 5 percent Ticket Sales/Cargo Sales Charge (TSC/CSC) or face sanctions, as the deadline ended on Friday March 31, 2017.
These are compulsory charges levelled on both local and international airlines by NCAA as enshrined in the 2006 Civil Aviation Act. The NCAA said on Tuesday that the debts owed the agency by domestic carriers had risen to about N15 billion.

To guarantee the autonomy of NCAA, the Act stipulated that the Authority should be financially sustained by remittances from the airlines, which are known as 5 percent ticket charge instead of depending on government for funding, which would obviously make the body kow-tow to the whims of government.

Few years ago, the federal government started a process of automating the payment system, whereby airlines would have to automatically remit these charges as revenues from tickets and cargo sales are credited to their accounts in order to forestall the continued indebtedness to the agency by the airlines, as NCAA noted that the money so remitted are actually paid by passengers; not by airlines.
That was how the Aviation Revenue Automation Project (ARAP) for revenue collection was introduced for domestic airlines and it was aimed at aiding data integrity, transparency, transaction accountability, controls and revenue assurance to the Authority.
The initial deadline for the automation was January 31, 2017 but it was later shifted to end of March.

The NCAA said in a statement last week that “with the expiration of this final warning, it is expected that all airlines that are yet to adhere to the automation and remit collected revenue to NCAA should comply forthwith. Failure to comply will be viewed seriously as the Authority will be forced to invoke the necessary provisions of the law against defaulting airline.”

THISDAY learnt that the NCAA wanted to enforce the penalty against airlines that have not automated their system for the remittances last Friday, but the Airline Operators of Nigeria (AON) kicked against it and the action was deferred. Incidentally, it was only Aero Contractors that has fully complied with the automation.
On Monday, AON Executive Chairman, Captain Nogie Meggison, at a media briefing, called for the suspension of the payment system.

He said that the airlines have refused to comply with the Aviation Revenue Automation Project and the process has to be suspended until the parameters that constitute the 5 percent ticket and cargo sales charge is clearly and properly defined.

“AON has no problem with the Authority going ahead to automate the collection and remittance of the said charges, but NCAA needs to give clarification on what constitutes the 5 per cent ticket and cargo sales charge. The 5 percent TSC is only applicable on base fare (that is the fare before other charges are added to the ticket) in compliance with industry practice and as currently applicable to international carriers operating out of Nigeria.

“AON members are currently remitting the 5 percent TSC charges and it is on record that NCAA introduced financial clearance process for services over the last year. Bur despite our members’ improved payment, airport infrastructure and service level continue to deteriorate across all facets of the industry under the same Authority,” Meggison said.

He accused the NCAA of playing double standard and adding why the NCAA called for the immediate mandatory automation, it has not addressed issues concerning the cost of integration into the project and while insisting that local airlines must migrate to the new system, it has not also directed international carriers operating in Nigeria to join the same automation platform.
He alleged that while domestic airlines are charged on their overall ticket fare, the foreign airlines are charged on their base fares (NCAA said foreign airlines pay through IATA Billings and Settlement Plan (BSP).

“This is wrong and discriminatory and also against the International Civil Aviation Organisation (ICAO) Non-Discriminatory policy. As per recommendation adopted by the ICAO Council, States are encouraged to incorporate the four key charging principles of non-discrimination, cost-relatedness, transparency and consultation with users into their national legislation, regulation or policies, as well as into their future air services agreements. (Source: ICAO DOC 9082)

“It is apparent that NCAA is preying on domestic airlines, which they see as an easy target, a cash cow and for cheap publicity, over regulating domestic operators, and pushing domestic airlines to the edge of insolvency/ bankruptcy. It is this kind of policy that has reduced the lifespan of Nigerian airlines and has consumed over 25 airlines in the last 30 years since deregulation in 1982,” Meggison also noted.

He said the NCAA is weak and has refused to enforce other aviation agencies like the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Airspace Management Agency (NAMA) from effectively carrying out their responsibilities in terms of improving airport facilities, like the runway quality, airport fencing, bird strike, navaids, fuel quality control by oil marketers, poor quality delivery by service providers, and check the excesses of agencies inflicting unauthorised and illegal billing contrary to the provisions of the 2006 ACT. (Part V (12)(2)), it is always hard on domestic airlines.

“AON is tired and cannot continue to be the only soft target or easy prey. We appeal to the NCAA to rather focus their energy on being an enabler and to foster growth in the Nigerian aviation industry in line with their Mission Statement; “To provide aviation safety and economic regulation in the most efficient, effective, quality and technology driven manner to the satisfaction and benefit of all stakeholders, consistent with the highest international standards and the sustainable development of the industry and national economy,” Meggison added.

He express regret that while other West African Countries’ airlines operate 24 hours, Nigerian carriers were subjected to daylight operations only till 6:30pm in most of the nation’s airports.

Furthermore, he said: “Yet the West African charges are almost a fraction of Nigeria’s domestic billing. Sadly also Nigerian airlines are the only mode of transport paying VAT. Marine, road and rail transport don’t pay; and even the foreign airlines operating into Nigeria are exempted from paying VAT in Nigeria FIRS (Part L Sub Section (b) No. 8 – VAT INFO 9701(3)) and their home base. It is interesting to note that Ghana on March 30, 2017 announced the cancellation of VAT on domestic and intentional air travel.”

It is yet unknown how NCAA would respond to this rebuff, but analysts opine that an amicable settlement of the matter will be the right thing to do as the development may prompt airlines to suspend operation to drive home their demand.

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