OPINION: High taxes and charges hindering growth of African aviation


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A Kenya Airways plane taxiing at the Jomo Kenyatta International Airport. PHOTO| COURTESY

By Abderahmane Berthé

One of the most fundamental factors that determine the success or failure of any commercial activity is the cost associated with it.

If the cost is too high, the net profit is affected, making it difficult for the owners to re-invest, expand and hire more workers. In fact, many businesses die because of the high cost of doing business.

Operators in the aviation sector, particularly airlines, are not exempt from this rule, which is why there has been growing concern around the upward trend in Taxes and Charges in the sector, as observed in several countries.

High taxes and charges are among the main factors that have resulted in high cost of operations in the African Aviation industry. At times high taxes are imposed to raise government revenues which are applied to non-aviation purposes.

Since taxes and charges imposed on the African airspace are among the highest in the world, this is not only hindering the growth and development of the industry but also greatly affecting its competitiveness.

Costly travel

According to recent figures from the African development bank, the cost of air travel in Africa remains exorbitantly high and is 200 percent costlier than in the European Union and 250 percent higher than in India for similar distances notably because of the very high taxes, fees and levies that are imposed on airlines in many African states.

This situation unfortunately excludes a very large section of the African population thus negatively impacting the bottom line of African airlines.

It is quite clear that the current cost structure of most African carriers will not allow them to operate well let alone survive the increasingly fierce competition from international carriers.

Currently, the aviation industry in Africa supports $55.8 billion in economic activity and 6.2 million jobs. Over the next 20 years, the African market is forecast to grow at nearly 6% per year.

With the understanding that the industry can only thrive in an environment where air travel is made affordable and more Africans are able to travel, all actors must ensure the sector is well-positioned for success.

This takes into consideration its direct links into economic growth as a result of spillover effects through the creation of direct and indirect jobs in the industry and other auxiliary sectors such as tourism, the service, and logistics sectors among others.

Let us keep in mind that in other regions of the world, the air transportation industry has managed to deliver vast opportunities for the local economy and served as a key driver in the creation of regional and global economic centers.

AFRAA Secretary General, Mr Abderahmane Berthe (second from right) accompanied by IATA and the Senegal Board of Airline Representatives meet the Minister of Transport of Senegal – Hon. Maimouna Ndoye Seck (third from right) to discuss taxes and charges in the region. PHOTO| COURTESY

 

Noting that high taxation is a significant obstacle to aviation development and Airline’s sustainability; industry stakeholders at AFRAA’s recently concluded 50th Annual General Assembly called upon governments to reduce taxes, charges and fees especially those related to fuel and passengers and avoid imposing airport development levies on passengers.

The assembly further encouraged members to re-invest taxes relating to air travel in developing and equipping airports as recommended by the International Civil Aviation Organization (ICAO).

Ministers responsible for civil aviation were asked to update their respective governments in charge specifically the finance ministers, on the details and rationale behind ICAO’s policies on taxation.

Airports were urged to adhere to ICAO’s principle of user consultation in the determination and fixing of charges and fees to ensure that they are commensurate with the level of service delivered.

It is therefore critical for governments to reduce levies targeting airlines as one of the ways to overcome the challenges faced by the African aviation industry. High taxation and charges in this sector are directly contributing to the high cost of travel giving impetus to the notion that air transport is for the elite effectively losing out on the opportunity to connect the continent.

As the African Airlines Association, we will continue our lobbying efforts towards the reduction of these costs to ensure the continent reaps the full benefits of an efficient air transport industry.

Mr. Abdérahmane Berthé is the Secretary General of the African Airlines Association (AFRAA). He took office on 01 January 2018.

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