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BusinessAFRAA calls on African governments to reduce "exorbitant" taxes on airlines

AFRAA calls on African governments to reduce “exorbitant” taxes on airlines

Honours Ethiopian Airlines

The trade association of the African airlines, African Airlines Association (AFRAA), on Monday called up on African governments to reduce taxes and charges threatening the viability of airlines on the continent.

Speaking at the opening of AFRAA’s annual general assembly held in Rabat, Morocco from November27-28, Secretary General Abderahmane Berthe, revealed that the high cost of operation in Africa including fuel, taxes and charges is threatening the viability of many African airlines. “Restriction in markets access in many countries is impeding the development of airlines networks. Inadequate infrastructure for air-operators in many countries is a hurdle for aviation development. Ownership and control rules inherited from basic Bilateral Air Service Agreements are preventing foreign capital equity to invest in African Airlines,” Berthe said.

While 16 percent of the world’s population resides in Africa, the continent generates less than 3 percent of global passenger traffic. Berthe noted that airlines blocked funds in some African States is adding to the financial distress of African Airlines. “The weak performance makes it difficult for African Airlines to finance their fleet.”  

Airline industry officials continue to express alarm over the amount of foreign currency funds blocked by African governments, as airlines on the continent await repatriation of some 670 million USD in earnings.

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In his key note address Alexandre de Juniac , director general and CEO of the International Air Transport Association (IATA), highlighted the challenge to airlines and the traveling public. “This is a big concern for us,” he said. “Many of these countries are facing severe economic challenges. But blocking airline funds puts air connectivity at risk. That, in fact, deepens economic challenges.”

De Juniac noted that timely fund repatriation serves everyone’s interest and called for urgent dialogue to mitigate the problem. After a series of negotiations with IATA, the governments of Nigeria and Egypt completely cleared their backlog of blocked funds. Zimbabwe, Angola, and Sudan continue to hold the majority of the blocked funds.

De Juniac further noted that Africa has become an expensive place to do business for airlines. While the world’s airlines on average make 7.80 dollars of profit per passenger, African airlines lose some 1.55 dollars for each passenger carried. In 2017, Airlines globally posted 38 billion dollars after-tax profit. The African industry improved profitability but is still making a net after tax loss of 100 million.

“Jet fuel cost is 35 percent higher in Africa than the rest of the world,” Juniac said. “Taxes and fees are amongst the highest in the world. African governments view aviation as a luxury rather than a necessity. We must change that perception.”

It appears that there is no shortage of examples illustrating the heavy burden that governments extract from aviation. “In Niger 80 dollars from each ticket is paid to the government in fees, taxes and charges, Cameroon recently added a 37 dollars development tax per passenger, DR Congo charges every arriving passenger 15 dollars to promote tourism—rather counter-productive if you think of it. And Ethiopia’s 24 dollars departure tax undermines the hub’s competitiveness,” Junica said.

However, everything is not as gloomy as it looks for the African airline industry. Despite the list of challenges Berthe sees hope for the airline industry. The growth rates of African population and African economies are drivers of a huge traffic growth. As a result, the traffic is expected to double in the next fifteen years. Berthe said the launch of the Single African Air Transport Market (SAATM) in January 2018 at the headquarters of the African Union in Addis Ababa, Ethiopia, is a vital milestone towards the effort to ease the market access for airlines.

AFRAA expects Africa’s air transport industry to expand at a rate of 4.9 percent during the next decade and passenger traffic to double in the next fifteen years. “We are working to maintain a high level of safety and security in the continent and to have profitable airlines,” Berthe concluded.

Among the resolutions, the Assembly called upon African governments to reduce taxes, charges and fees especially those related to fuel and passengers and avoid imposing airport development levies on passengers.

The Assembly recognized companies and individuals for their remarkable performance and contribution to aviation industry in 2018. Ethiopian Airlines won best airline of the year award for seventh year in a row for sustainability and performance in global operation.   

AFRAA which is celebrating its golden jubilee held its annual general assembly under the theme “Strengthening African Aviation in a Liberalized Environment.” Hosted by Royal Air Maroc (RAM) under the patronage of King Mohammed VI of the Kingdom of Morocco the assembly attracted 460 delegates from 61 countries. Established in 1968 in Accra, Ghana, AFRAA counts 40 member airlines representing 85 percent of the African passenger traffic. Ethiopia is one of the fifteen founding members of the association head quartered in Nairobi, Kenya.        

Aviation contributes 55.8 billion dollars for the continent’s GDP and supports 6.2 million jobs.

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