Nigerian Govt considers seat-for-debt arrangement to settle domestic airlines’ debts

Indications have emerged that the Federal Government is considering a new seat-for-debt arrangement to address outstanding debts owed by domestic airlines to aviation agencies.

A senior source in the Ministry of Aviation and Aerospace Development disclosed that under the proposed framework, airlines could allocate tickets in place of cash payments to aviation agencies, including Nigeria Civil Aviation Authority, NCAA, Nigerian Airspace Management Agency, NAMA and Federal Airports Authority of Nigeria, FAAN, towards settling their debt obligations.

It is expected that the arrangement would provide the government with a continuous debt-recovery mechanism while allowing airlines to preserve cash for critical operations.

The source noted that the proposal is being considered as an alternative to aggressive enforcement measures that could disrupt airline services.

Further consultations are expected to determine the participating airlines, eligible debts, allocation arrangements and the possibility of commencing with a controlled pilot programme.

The consideration of the seat-for-debt plan followed the presentation of a proposal on ‘national ticket-for-cash aviation revenue recovery programme’ to officials of the Ministry of Aviation and Aerospace Development by a team from QuickAir Networks Ltd, led by Dr Segun Oyebolu, an aviation technology expert.

In the presentation, Oyebolu explained that under the debt-for-seat arrangement, existing debts can be repaid via a batter arrangement which allows the airlines to exchange their perishable assets in place of outright cash payment for the debts owed the ministry and its agencies.

Oyebolu explained that in view of the cash-strapped situation of the airlines arising from high operating expenses, paying the debts they owe government via a flexible seat-sale arrangement will be a very attractive option.

“In practical terms, the solution is based on each of the airline creating a centralized digital wallet in the amount owed the various agencies as at date. This digital wallet holding the equivalent of agreed debts position will become accessible to the ministry or its designated distributor.

“It is from these wallets that the distribution platform will commence distribution of these assigned stocks to large agencies, corporate and interested governmental agencies to access discounted flight tickets of these various airlines,” he noted in the presentation.

Oyebolu however warned that the debt-for-seat arrangement will be of little value if accumulation of fresh debts is allowed.

According to the proposed arrangement, as airlines’ customers make ticket payments online, a five percent Ticket Sales Charge, TSC, will be automatically remitted to the designated account of the NCAA while 95 percent of the sale shall remit immediately to the airline.

Oyebolu informed officials of the aviation ministry that the arrangement is ready for takeoff once the Airlines Organization of Nigeria, AON, agrees on implementation.

Nigerian domestic airlines reportedly owe over ₦60 billion in accumulated debt to aviation agencies and fuel suppliers. Airline operators blame the debt crisis on skyrocketing Jet A1 fuel costs and foreign exchange pressures. However, government agencies have pointed to unpaid statutory charges like the five percent Ticket Sales Charge, TSC, owed by the airlines to the NCAA.

Non-remittance of the TSC has resulted in aviation labour unions, such as the National Union of Air Transport Employees, NUATE, and Association of Nigerian Aviation Professionals, ANAP, picketing the terminals of the domestic airlines, including Air Peace, in Lagos and Abuja.

NUATE recently accused domestic airline operators of withholding about N25 billion in ticket sales charges meant for aviation agencies. The union warned that the development could undermine the sustainability of the aviation industry and affect workers’ welfare.

Also, Minister of Aviation and Aerospace Development, Festus Keyamo, recently revealed that one domestic airline is indebted to the Federal Government to the tune of N14 billion. The minister warned that the mounting liabilities are undermining the ability of aviation agencies to provide critical services.