10 April 2017

Ghana: Domestic Airlines in Conflicting Response to Ticket Vat Removal

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Business Day has discovered an apparent conflict in the response of domestic airline operators to the removal of the 17.5 Value Added Tax (VAT) on domestic air tickets.

The removal, which took effect with legislative amendments to the tax regime about a week ago, was expected to result immediately in the reduction of air ticket prices.

As at press time on Friday, the two main domestic airline operators in the country had reacted in diametrically opposite fashion.

Passengers of Africa World Airlines (AWA) were paying prices prevailing before the VAT removal while travelers on Starbow Airline flights were paying reduced prices.

Government had intended to force down the price of domestic air tickets when Ken Ofori-Atta, the Minister for Finance, indicated the removal of the VAT during the presentation of the 2017 budget in early March.

Now, whereas Starbow Airlines, owned by Lebanese Anthony Sawuud had its fares reduced in accordance with the removal of the VAT, AWA, owned by Togbui Afede, a popular chief from the Volta Region and a member of the Council of State, was yet to do so.

When this reporter placed a call to the point of sales and bookings of the Starbow, a lady by name Nana Ama revealed that the cost of traveling from Accra to Kumasi, the Ashanti Regional capital, had been reduced from GHC315 to GHC255.

A return ticket on a Starbow flight for the Accra-Kumasi route now costs passengers GHC530, Business Day further gathered.

Formerly a two-way Starbow flight from Accra to Kumasi was GHC630. This means that GHC100 has been taken off the fare.

Further checks by the Business Day at the point of sale of Africa World Airlines (AWA) revealed that no reductions had been effected in the pricing of tickets. A call placed to a retail point of the airline elicited confirmation that passengers of AWA will, at least for the time being, have to pay more than their counterparts on going by Starbow Airline.

A two-way flight for the Accra-Kumasi route will cost a passenger aboard AWA flight GHC680.

Before last week, Simon Allottey, who is the Director-General (D-G) of GCAA, had led calls for the reduction of fares in the sector when he moderated at a session of the Second International Civil Aviation Organization (ICAO) meeting on the 'Sustainable Development of Air Transport in Africa' conference.

According to Allotey, the aviation regulatory authority would push for the reduction in the fares of domestic air transport fares to boost the industry.

"The removal of the 17.5 percent VAT should see reduction in the pricing of fares latest by the end of the first quarter," he told the gathering of experts.

He said the industry must see a reduction in fares to enable more and more patronize domestic flights and park their cars.

In a bid to boost and save the domestic flight industry, the authority had advocated for the reduction, which was warmly welcomed by the new government.

Similarly, Cecilia Dapaah, Minister for Aviation, had anticipated that the removal of the VAT would result in fares going down drastically.

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