AirPeace CEO Warns: New Tax Reforms Could Skyrocket Domestic Airfares to ₦1.7 Million, Risk Airline Collapse

Clarion Newschannel – Lagos, December 29, 2025

Allen Onyema, Chairman and Chief Executive Officer of Air Peace, has raised serious concerns about the impending implementation of Nigeria’s new tax reform laws, set to take effect from January 2026, warning that they could drive domestic airfares as high as ₦1.7 million and potentially collapse local airlines within three months.
Speaking in an interview on Arise Television on Sunday, Onyema highlighted the cumulative impact of multiple taxes, levies, and charges already burdening the aviation sector. He specifically pointed to the reintroduction of 7.5% Value Added Tax (VAT) on air ticket fares, aircraft imports, engines, and spare parts—a reversal of previous exemptions—as a major threat.
“According to ICAO [International Civil Aviation Organisation], you are not supposed to go into revenue generating for government. It should be cost recovery,” Onyema stated, adding that Nigeria’s practices, including charging VAT on tickets, deviate from global standards that emphasize cost recovery over revenue generation in aviation.
Onyema explained that airlines retain only a fraction of ticket revenue due to existing deductions. For instance, from a ₦350,000 ticket, operators might keep as little as ₦81,000 after mandatory charges like the 5% Ticket Sales Charge to the Nigerian Civil Aviation Authority (NCAA) and other levies. “We are suffering multiple taxation, multiple charges… Almost 65 to 70 percent of that money is not coming to the airlines,” he said.
The new reforms, embedded in the Nigeria Tax Act 2025 signed by President Bola Tinubu earlier this year, remove longstanding VAT exemptions on commercial aircraft, parts, and passenger tickets. Onyema argued that adding 7.5% VAT directly to fares would force sharp price increases to cover costs, warning: “With 7.5 percent on ticket fares, ticket fares will hit ₦1.7 million soon.”
He further cautioned that the financial strain—compounded by high bank interest rates of 30-35% on loans for aircraft purchases—could ground domestic carriers, reduce passenger demand, and trigger broader economic fallout, including impacts on banks and jobs.
Despite the challenges, Onyema noted that current domestic fares remain relatively low globally when adjusted for operational realities, with entry-level tickets still available from around ₦125,000 to ₦150,000 on some routes. However, festive periods like Christmas have seen spikes due to demand and one-way traffic patterns, particularly on Southeast routes where return flights often operate nearly empty.
The Airline Operators of Nigeria (AON) have repeatedly engaged the National Assembly and tax authorities on these issues, seeking reviews to prevent sector-wide disruption. Onyema expressed hope for government intervention but stressed the urgency: “If we implement that tax reform, Nigerian airlines will go down in three months.”
The Nigerian Civil Aviation Authority (NCAA) has pushed back on some claims of excessive taxation driving recent fare hikes, attributing increases to market forces like demand and supply during peak seasons.
As the January 2026 deadline approaches, stakeholders await potential amendments to balance fiscal goals with the sustainability of Nigeria’s aviation industry.