Airlines Flee Heavy Taxes, Ditch Local Maintenance

Uncoordinated tax administration is increasingly getting unfriendly and becoming a disincentive to businesses including the aviation industry which has been forced to carry out major checks abroad instead of locally, Nigeria CommunicationsWeek has learnt.

Though Nigeria can lay claim to some domestic aircraft maintenance, the savings from doing the checks locally are quite little due to the current taxation policy.

The tax system highlights the difficulties in doing business in the country and the aviation industry is worried at the huge foreign exchange expended abroad in the maintenance of the nation’s aircraft.

Captain Akinlawon George, managing director, Aero Contractors said tax system put maintenance provider in a big disadvantage against foreign players.

“Nigeria has relatively high import duties on aircraft parts. Airlines typically fly their aircraft to, say, Turkey to have them serviced and relevant parts replaced. Once that aircraft flies back to Nigeria, the new parts are not subject to import duties as they are already installed on the plane. This puts any Nigerian maintenance provider in a big disadvantage against foreign players.” George said

He explained that “A Nigerian maintenance provider would need to import all spares used in maintenance and thus incur the import duties that those maintaining their aircraft abroad avoid completely.”

Prescribing a panacea to the problem, George said the resolution to this issue can be either that spares imported as installed on a plane are subject to import duty, or that Nigerian maintenance businesses would get import duty relief.

“If Nigeria ever wants to allow for aircraft maintenance business to develop in Nigeria, it needs to create a level playing field between domestic and foreign operations. Right now, Nigeria is subsidizing maintenance businesses abroad and as a result is not allowing the same business develop in Nigeria,” he added.

Nigeria CommunicationsWeek gathered that the Nigerian Civil Aviation Authority (NCAA) had recently approved Aero as an Aircraft Maintenance Organisation (AMO) for “A” and “B” checks on Boeing aircraft, various levels of checks on other airplanes.

With that certification, Aero intends to expand existing hangar to enable it meet the requirements of aircraft maintenance work including third party work so that it would be able to service the West African sub-region market for third party maintenance work, provide employment opportunities, training and staff enhancement programmes for employees.