High Tariffs, Taxes Killing African Airlines

Aviation experts argue that most airlines in Nigeria and indeed Africa are insolvent but for a few airlines like Ethiopian Airlines and Royal Air Maroc.

This fact was reinforced on Tuesday at the International Air Transport association (IATA)’s Aviation Day, a two-day conference held in Abuja that x-rayed the challenges faced by airlines in Africa.

Many speakers at the event said airlines in the continent are insolvent because they are burdened by too many charges and taxes imposed on them by government and its agencies.

They also posited that the situation is bad because concerned authorities see air transport as elitist, which merely serve the leisure of the rich, noting that until government and its agencies begin to see air transport as a catalyst to economic development and create possibilities that would enable ordinary people to also travel by air, African states may not be able to reap the huge benefits that abound in the aviation industry.

IATA’s Regional Vice-President Africa and Middle East, Hussein Dabbas said government of some African states see aviation as cash cow and level outrageous charges and taxes on airlines. He said Senegal charges over $100 per passenger, while Nigeria charges about $60 per passenger; that is the sum of taxes each passenger pays on international travel and remarked that while Senegal may charge the highest in the continent that of Nigeria is equally very high.

IATA urged African governments to tackle the excessive surcharges on fuel, which can make fuel purchases on the continent up to 20 percent more expensive than the global average. The world body said airlines operating to Ethiopia, Gabon, Ghana and Kenya are particularly affected by above market fuel costs.

“These surcharges increase airlines’ cost burden when they are already operating in a challenging environment. They also hinder growth in an industry that delivers extensive socio-economic benefits,” IATA said.

The consequence of high charges on airlines is that it raises the cost of air ticket and thereby alienates many from choosing air travel as means of movement. So overall, travelling by air in Africa is exorbitant. In Nigeria, air travel is really seen as elitist and that explains why out of about 170 million people, less than one percent of that population travel by air.

Some industry observers remarked that if about five percent of Nigerian population travels by air, it would make aviation the greatest contributor to the GDP and would create employment for over 150,000 people with indirect and associated employment of over 1.5 million people.

Dabbas however said there are no specific amount of charges specified but charges in Africa are outrageously high, contending that cost of picking up fuel in the continent is 20 percent higher than what is obtainable in any other continent in the world.

“Despite the fall in oil prices, it has not reflected on the prices of aviation fuel to the airlines; the less the charges leveled on the airlines the less the passenger will pay in order to travel,” Dabbas said.

Speaking on high charges during the conference, the Managing Director of Arik Air, Chris Ndulue said what makes the air transport sector to thrive is passenger throughput, noting that the industry cannot grow in an environment where less people travel by air, adding that high taxation drives up the fares and keeps the passengers away.

He noted that if there is high passenger traffic, it in-turn grows the airlines and promotes ancillary services, all to the overall growth of the economy.

Dabbas had also noted that travelling in Africa, a passenger spends 42 per cent higher than another passenger who is travelling in Europe, adding that in Africa it is the airlines that suffer because aviation agencies jerk up fares as they are largely monopolies and pseudo-monopolies, but in Europe monopoly is minimised.

He also disclosed that airlines in Europe generate $9.69 cents per passenger as profit while in Africa airlines lose $1.50 cent on each passenger and that explains why they are insolvent.

Ndulue, further noted that those in the aviation business are not happy with the high charges and taxes on airlines and called on the private sector to take over the airports for effective management and high profitability. He said there is so much to pay at the airports and while these payments are made, most of them are passed to the passengers.

The Arik Air Managing Director said the high charges and taxes have made it difficult for airlines to thrive successfully and urged that government should review these charges and taxes, remarking that VAT should not be charged on airlines and other transport system in the country.

IATA said there is need to demystify the aviation business, stating that governments in Africa should stop seeing aviation as elitist but to be seen as a necessity, adding that it is onus on government to make this happen for the development of the aviation sector.

Besides fuel, aviation charges may the second highest cost of operation for African airlines and as long as governments in the region do not tame these huge costs, airlines in the continent would continue to post negative balance sheet.