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Operators of domestic airlines in Ghana are predicting tougher times ahead for their activities following government's17.5 percent VAT increase on domestic airfares. Although the operators say they are yet to feel the impact, they seem convinced that the increase which took effect from July 1,  will cause a shortfall in  passenger intake.

Domestic air travelers would have to pay an additional 17.5 percent VAT on every ticket purchased following the directive from the Ghana Revenue Authority.

For passengers who board Starbow Airlines, one way route to Kumasi now goes for 285 cedis from the 245 cedis excluding Vat.

Chief Executive Officer of Starbow James Eric Antwi, who spoke off camera to TV3, said passengers are already complaining about the new charges. He fears in coming weeks, the increment will see them record lower numbers in passenger intake.

Chief Operations Officer of Africa World Airlines, AWA, James Apiigy, also told TV3 one area likely to be the most affected is their operating cost. Passengers of Africa World Airlines will now board a return flight from Accra to Kumasi at 581 cedis instead of 490cedis with the VAT increase.

He noted that the 17.5 percent  will impact negatively  on their activities especially with the continuous depreciation of the cedi.

"For the airlines, about 80 to 85% of our of cost are dollar-based but we are selling in cedis. And now we have 245 cedis and then we are to add another 17.5%. After sometime, if the cedi continues to depreciate, the VAT will limit our own ability to raise fares to respond to the cedi depreciation. So you will not only be losing money on your operation but you will also be losing money on the exchange rate" he lamented.

Already operators in the industry say they are in talks with government for a reassessment of the policy.

"We know government needs money but if the objective of government is to create an aviation hub here, then a prerequisite for that to happen, is to have a very strong viable domestic aviation industry. But where you are paying a lot of high taxes for example on jet fuel, you are paying customs duty and VAT on spare parts that you import so it makes things difficult because the cost base just keeps rising".

The effect of the 17.5 percent increase will be felt by passengers who travel through Takoradi, Kumasi, Sunyani and Tamale.

Year on year first quarter figures  indicate that domestic air traffic dropped by 20 percent  in passenger load.

Already, domestic airline operator Antrak Air, has suspended operations for three months as it struggles to meet its operating cost.