The Chairman and CEO of Air Peace, Allen Onyema, has cautioned that domestic economy airfares could exceed N1 million starting next year.

Speaking on The Morning Show on Arise News on Sunday, Onyema attributed the potential increase to the forthcoming implementation of new tax reform laws set to take effect in January 2026.

He explained that the legislation removes several tax exemptions previously granted to airlines under the 2020 Finance Act, exemptions that had helped lower operating costs.

Onyema warned that the removal of these incentives would sharply increase airlines’ operating costs, a burden that would inevitably be passed on to passengers.

He explained that the new tax reform reintroduces Value Added Tax on aircraft, spare parts, and air tickets—items that were previously exempt under the 2020 Finance Act.

For example, Onyema noted, airlines importing aircraft valued at around $80 million would face a 7.5 per cent VAT, adding billions of naira to their expenses.

He emphasized that Nigerian airlines already operate in a high-cost environment, with borrowing rates as high as 35 per cent, making it impossible to absorb the additional costs.

Onyema also referred to the International Civil Aviation Organization annex, which stipulates that VAT should not be applied in such cases.

He warned that if the law takes effect in 2026, economy-class fares could rise significantly.

“By the time you bring these things in, at the end of the day, the cost of operation will be huge… your ticket fares will hit N1. something million soon,” Onyema said.

He added “If we implement that tax reform, Nigerian airlines could go down within three months.”

He stressed that any fare increases would stem from rising operational costs, not from attempts to profiteer, and argued that supporting the aviation sector is crucial for ensuring connectivity and promoting economic growth.

In addition to the impending tax reforms, Onyema pointed to persistent difficulties facing Nigerian airlines, including high fuel prices, foreign exchange constraints, and multiple statutory levies.

He explained that for a domestic ticket priced at around N350,000, only about N81,000 actually goes to the airline, with the remainder absorbed by taxes, levies, and other charges.

Onyema rejected claims that airlines overcharge passengers, emphasizing that Nigerian domestic fares remain among the cheapest in the world when converted to dollars.

He also pointed out that several domestic routes—especially to the Southeast, are barely profitable, as planes often return with very few passengers.

For years, Nigerian airlines have raised concerns over the heavy burden of taxes, levies, and charges that eat into their revenue.

In December 2025, an additional $11.50 security levy under the Advance Passenger Information System (APIS) took effect, bringing the total charge on international tickets to $31.50.

However, under a 2024 agreement among ECOWAS member states, all air ticket taxes across the sub-region are set to be abolished from January 1, 2026, aiming to lower fares and enhance regional connectivity.