Airlines’ TSC default threatens investor confidence – Finchglow

Group Managing Director of Finchglow Holdings Ltd, Bernard Bankole

The Group Managing Director of Finchglow Holdings Ltd, Bernard Bankole, has warned that airlines that fail to remit the five per cent Ticket Sales Charge may raise questions about their commitment to safety and financial responsibility.

Bankole said this in Lagos recently during an interaction with aviation journalists, amid the lingering dispute between domestic airlines and the Nigeria Civil Aviation Authority over the non-remittance of the charge.

The five per cent Ticket Sales Charge has been the reason for recent upheaval in Nigeria’s aviation industry. Airlines are legally required to collect and remit the controversial five per cent of ticket sales to the Nigerian Civil Aviation Authority, which then shares the money among aviation agencies.

Airlines have recently argued that the charge adds to their financial burden at a time when they are already facing high aviation fuel prices, exchange-rate pressures and other operating costs.

They also object to acting as collection agents for money they regard as a statutory levy rather than payment for services provided to them. This briefly caused different layers of trouble.

The operators have, however, agreed to pay in a percentage agreed with the industry regulators.

Bankole argued that the TSC was not money belonging to airlines, but funds collected from passengers on behalf of the relevant government agencies and therefore ought to be remitted as required.

“If we must have foreign direct investment, we better start doing the right things. We have investors that are ready to come in and partner with people like us, but unfortunately such may not be possible because they will begin to see that it seems the law in your country allows rubbish.

“The TSC is not the airlines’ money; it is the money you collected on behalf of the agencies. Why is it now a problem to remit it? It will become an integrity issue; it means you can’t be trusted. If you can refuse to pay the TSC, how are we sure that you have enough fuel in the aircraft? That is another thing. He that is faithful in little will be faithful in much.”

Bankole, however, acknowledged that airlines were operating in a difficult environment, stressing that their challenges should not be used as an excuse for failing to meet statutory obligations.

He said, “What is right is right. I’m not saying the airlines are not facing challenges within the aviation industry, but TSC is a responsibility of the airlines to pay to the regulators; they should pay. The airlines’ ability to pay and willingness to pay must match.”

The Finchglow boss also questioned why domestic airlines had continued to complain about the five per cent charge when international airlines were also required to pay the same percentage on applicable international tickets.

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He stated, “The five per cent is the same thing international airlines pay. So why are the domestic airlines complaining? Why are they paying it on international tickets and the domestic airlines are not willing to pay?”

To permanently resolve the recurring dispute over TSC payments, Bankole called for the establishment of a centralised and automated data system that would allow airlines to monitor their obligations in real time.

He said such a system would eliminate uncertainty over outstanding payments and reduce dependence on manual processes. He said, “If we really want this issue of TSC to become a thing of the past, then we should have a centralised data system. I should be able to sit in my office, have a login and see how much I am owing, for instance.

“Once that is done, automation becomes the next thing. Till tomorrow, the NCAA still issues receipts. Don’t issue us receipts; we should be able to access it ourselves.”

Bankole also called on the Federal Government to write off genuinely doubtful legacy debts owed by indigenous airlines, arguing that forcing new management to inherit liabilities accumulated over several years could undermine the survival and financial stability of carriers.

The NCAA has alleged that domestic airlines owe it about N19bn and $7.6m in unremitted five per cent TSC and Cargo Sales Charges. The airlines, however, have disputed the indebtedness.

Operators at a recent industry event also proposed replacing the percentage-based TSC with a fixed charge as a way of ending the recurring dispute.

According to Bankole, the government should treat genuinely irrecoverable legacy debts as doubtful and allow airlines to make a fresh start instead of continuously burdening them with liabilities accumulated under previous administrations and managements.

He argued that where a debt had remained outstanding for five, 10 or even 15 years and had become doubtful, continued pursuit of its recovery could become counterproductive, particularly when a new management had taken over an airline.

He emphasised, “It’s a basic thing they taught us in accounting. When a bad debt becomes doubtful, what do you do with it? You let it go. So, the government doesn’t know, right? So, you can’t continue to carry it, so you don’t use it. You cannot continue to carry bad debts that have become doubtful.

“So, when we are talking about legacy debts, it means the debt is old. That is why you can’t use the word legacy debts because it has become doubtful. You can start afresh. There is nothing wrong with a business filing for bankruptcy, and when a business files for bankruptcy, it means it’s no longer a growing concern.”