High taxes to blame for low flying levels in East Africa, say airlines

Airlines in the East African aviation industry are blaming multiple and uneven taxes levied on the sector for the high cost and low level of air travel in the region.

At a meeting of aviation stakeholders held in Nairobi last week, stakeholders said the cost of flying has made the sector uncompetitive compared to other regions noting that this is an impediment to intra-regional travel. 

Kenya Airways tax manager Beatrice Njagi said levies like the 16 per cent Value Added Tax on ticket sales and spare parts imports, often force airlines to borrow at high interest rates to meet their obligations impeding growth of the sector.  

“This has forced airlines to borrow in order to finance payment of VAT. Further, the VAT refunds more often than not come late,” Ms Njagi noted.  

She cited the 2.25 per cent import declaration fee charged on jet fuel into Kenya and the Excise Duty Bill which proposes a Sh19.895 per litre of imported fuel into Kenya as some of the issues contributing to the high cost of air travel. 

VAT REFUNDS

According to the Kenya Civil Aviation Authority acting director general Joseph Kiptoo, whereas taxes are often blamed for the high cost of air travel in the pricing of fares, other factors such as infrastructure, water, power and competition among airlines have a big impact on charges.  

Jambojet chief executive officer Willem Hondius said VAT refunds should attract interest rates at market rates whenever there is a delay in reimbursement.

He said air operators regularly change spare parts, which should be exempted from VAT and other charges.  

The Kenya Association of Airline Operators chief executive officer Eutychus Waithaka advocated for increased bilateral air service agreements between regional states, which would encourage more flights and bring down fares.  

A recent report by the African Airlines Association noted that high airport taxes and charges are inhibiting growth and development of the African air transport industry.

HIGH-COST TRAVEL

Taxes, particularly for intra-African flights, are sometimes higher than the actual fare for the trip.

And, with most of the African airports monopolies and State-owned, it may take a long time for the industry to benefit from competitive charges. 

There have, however, been proposals for the establishment of secondary airports on major routes for low cost carriers to ensure that they do not operate from the same facilities as major airlines, where they are out-competed by established firms.  

The meeting was attended by aviation officials from Kenya and other East African countries, and sought to find solutions to the high cost of air travel.

It was a precursor to the on-going East African ministerial meeting in Nairobi seeking to devise plans for reducing the cost of air travel. The meeting ends today.