25 May 2017

East Africa: Reduce Taxes, Open Up Skies to Raise East Africa Air Traffic

At just 3.4 per cent, intra-East Africa air traffic has been increasing at half its average rate of economic growth, a problem that experts blame on the region's high taxes, poor infrastructure and the failure to liberalise the skies.

To increase air traffic, Lilian Awinja, the East African Business Council executive director, says the region must take a fresh look at its decision to keep it's skies closed.

"The EAC should fully implement the Yamoussoukro Declaration, as well as finalise liberalisation of air transport regulations and harmonise taxes across the region," she says.

A study conducted by the East African Business Council found that passengers in the region pay departure taxes averaging $37 for Rwanda, $50 for Kenya, $20 for Burundi and $40 for both Uganda and Tanzania.

But these taxes can increase depending on destinations, with passengers sometimes forced to pay, as high as 40 per cent of the ticket price, when the arrival charges are included.

For example, a person purchasing a Burundi to Rwanda air ticket will pay $102 in taxes. The Burundi government will have charged $60 off this ticket, while Rwanda on the arrival side takes $42. These two charges translate into 42 per cent of the air ticket.

In addition to the taxes, EAC partner states are accused of charging relatively high landing and navigation fees, when the quality of infrastructure available to aircraft is taken into consideration. This affects profitability for the airlines and their ability to continue operating in the different air spaces in the region.

By comparison, South Africa does not charge taxes. Other countries charge only modest taxes. For example, Norway and the UAE charge less than $10 while the US charges $17.8.

The study also found that the current ownership restrictions disadvantage the broader aviation industry, carriers, passengers and employees.

"The injection of cash from well financed investors gives carriers the ability to refresh fleets and quickly expand route networks, therefore providing consumers more destination choices," notes the report.

But a situation where EAC partner states liberalise their skies, while agreeing to the removal of restrictions on who can invest in the region's aviation, is unlikely to happen soon, because according to officials this would disadvantage local airlines.

Alfred Kitolo, director of infrastructure services at Kenya's Ministry of East African Community Affairs, says that despite the country having been among those that adopted the Yamoussoukro Declaration, it has since realised it would not work for them and did not implement the open skies policy.

Instead, the country has been negotiating bilateral arrangements for liberalisation with countries like Uganda, Burundi, Eritrea and Sudan.

The arrangements are expected to expire once the EAC concludes negotiations that will see countries in the region sign joint multilateral air service agreements.

Mr Kitolo says that multilateral air service agreements will be signed using the conditions that currently exist in the region where only locally owned airlines are recognised.

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