African Govts Urged To Review Airport Charges ~ IATA

The International Air Transport Association (IATA) has called on African governments to  review their airport taxes and charges  to attract more airlines  into the continent.

It said airport charges and taxes in Africa were the highest in the world.

A reduction of the charges would attract more players into sector, create jobs and enhance its contribution to the Gross Domestic Product (GDP) of the countries.

An IATA study of 12 African countries two years ago showed that a downward review of the charges could create about 155,000 additional jobs in the countries surveyed, and add $1.3billion to the GDP of 12 countries. It was for these reasons that IATA had engaged some African governments for a review.

The list of charges to include: ground rent, landing and parking fees, service recovery charge, navigation charges, fuel surcharge; but a need to review the  levy on aviation fuel, which has bee a negative impact on airlines’ operating costs.

The price of aviation fuel is higher in Africa – above the global average of $1.3, that it  is between $2 and $3.7 more than twice the global average.

Some African governments were raising revenues from their aviation sector through charges, and advised them to imbibe the model of the developed world, where governments were building new airports to accelerate the growth of air transportation.

 “It is actually to let  African governments realise that aviation is not a preserve of the rich or famous or those who can afford it. It is for this reason that two years ago in 2014, we did the study on the benefits of aviation."

“A study on the benefit of aviation in Africa and a select of 12 countries, three from Southern African region. The outcome of the study indicated that 155,000 jobs would be created and $1.3 billion will be added to the Gross Domestic Products of the 12 countries’ economies.

“The Five million passengers who are not able to travel by air will be able to because of increased competition.“This would bring down airfares by up to 35 per cent. This was a significant diversion from the previous mentality that air travel is for the affluent only.

“Governments will see the benefits in terms of employment generation, in terms of GDP contribution and in terms of business facilitation. Use this as a tool to engage with governments to ask them ‘why are you over taxing aviation instead of making it more competitive.” He also spoke of plans to engage the governments to see how aviation could be utilised for economic development.

“We  have been engaging with governments, especially in countries where taxes are higher. Today,fuel prices globally average per litre is $1.3. In Africa, it ranges between $2 and $3.77. In some places, more than twice is globally.

“On the average, we notice that fuel price is 21 per cent more expensive in Africa than the world average and the addition of taxes therein. Africa is not a rich continent, then why must we be paying the most? “ It is unacceptable that aviation fuel price is higher in oil producing country like Nigeria. 

“We are asking governments to review these taxes.”

“If the airport taxes or charges are reduced, you tend to attract a lot more passenger traffic. More airlines would find it more competitive to come. In the case of Africa, " I always tell the airport operators. One thing we do is that we forget that airports next door are competing against each order", 

“If Johannesburg Airport becomes too expensive, an airline would rather operate to another airport. A need to be careful to make airports more attractive. If they are attractive, many airlines would come in. " If the cost of flying there is cheaper, many airlines will come; if the taxes are less and there is more attractive destination.

IATA was worried over the poor financial performance of African carriers, but the body has projected 2017 as possible date for the airlines to return to profitability. “I don’t know how long it is going to take, we estimate that African airlines will be back to profitability. 

“ If you look at last year, for instance, Ethiopian Airlines made $200 million profit, but if you take their profit, plus the loss of other airlines, you get a bigger loss.”

The low cost carrier model may not be workable for some countries in the continent because of existing barriers and other considerations. “Low cost airlines, wherever they exist, play a very critical role contrary to thinking by some legacy carriers that low cost carriers have come to take over their market.

“Low cost carriers have a tendency to stimulate additional demand and come up with a new market segment that in most cases has not been seen before. “Unfortunately, in Africa, you are seeing a concentration of low cost carrier still in a few markets.

“This is because the low cost business is based on low price and high volumes and, many markets in Africa, we don’t have the volumes. There are volumes in South African domestic market. “To an extent, Nigeria might eventually come up with low cost model in the future.

“You see that in North Africa, we have low cost model in Egyptian market, in Morocco because of the volumes there. Within Africa, it is a huge challenge because the volumes are not there.

“The other limitation in the growth of the low cost carriers is the limited Bilateral Air Services Agreement (BASA). Such is the case with Fastjet, and its efforts to get into neighbouring countries and the challenges it is having. I am sure you have been reading about it. 

“Those limitations are crippling and we are not likely to see a lot of them coming up any time soon.

“However, in the future, if the market is liberalised, if these 22 countries that signed a declaration open up their markets, we could see many more.”

The regulatory framework for aircraft insurance in Africa is below the global standards, and said many airlines do not posses valid insurance policy.

“I don’t know if IATA plays any role in insurance. In Africa, many airlines don’t do proper insurance. We don’t oversee the implementation or validity of insurance programme. 

“What we do and encourage airlines to do is that we know that in Africa, the insurance scheme is much higher than elsewhere, so insurance premiums are much higher for African operators. Once you become International Operations Safety Audit  airline, you are given certain consideration because your risk exposure is lesser.”

An exclusive online interview of IATA’s Vice President, Africa, Mr Raphael Kuuchi.

Source - Aviation News