High Taxes Threaten Aviation Industry

The International Air Transport Association (IATA) has bemoaned the high taxes imposed on the domestic aviation sector in Ghana, saying the phenomenon militates against the growth of the industry.

According to the Vice President of IATA for Africa, Mr Raphael Kuuchi “taxes on jet fuel increase the cost burden of airlines who are already operating in a challenging environment and hinders the domestic growth of an industry that brings extensive socio-economic benefits.”

He said Ghana must not treat its aviation industry as an easy target for taxation if it is serious about becoming an aviation hub in the sub region, adding that the negative impact on the economy of taxing air transport outweighs the revenue raised.

Mr Kuuchi has therefore urged the Ghanaian government to recognize aviation as a socio-economic enabler and provide the appropriate infrastructure.

In an interview with this paper, Mr Kuuchi noted that the elimination of taxes on jet fuel would put Ghana in line with the common practice in Europe and countries around the world where aviation growth is strong.

“It will not only boost aviation in the country but create a new opportunity for Ghana to become a hub for aviation and fuel trade,” he stressed.

The IATA Vice President encouraged government to reduce taxes and charges on infrastructure in order to attract more capital inflow into the industry.

Ghana’s domestic aviation sector has been reeling under high operational costs, worsened by the high costs of jet fuel which has compelled some service providers to fuel their aircraft in neighbouring Nigeria.

The difficult terrain has seen the exit of three airlines, Antrak Air, Fly540 and CityLink leaving only two, Starbow and Africa World Airlines (AWA). 

The three have recently indicated their return to the industry but experts are wondering whether they can survive the odds.

The imposition of the 17.5 per cent Value Added Tax (VAT) by government in 2014 sent airfares through the roof. 

Fares on all routes jumped up by 40 per cent after the VAT took effect, resulting in a 30 per cent reduction in passenger patronage of flights.

Even though the government through the Ghana Airport Company (GACL) is investing in the expansion of airport infrastructure across the country, industry players say the pace is too slow. 

Chief Executive Officer (CEO) of Starbow, Mr James Eric Antwi lamented the alarming losses the airline has had to contend with in the wake of bad weather.

“ The weather became so bad that in December 2015 we operated only 25 per cent of our flights, in January this year we did 65 per cent and fell drastically again within the first week of February, “ he explained.

Mr Antwi blamed the Airline’s predicament on the absence of requisite infrastructure at the regional airports to assist visibility and navigation.

“These are challenges that have to do with infrastructure; we need to have proper navigational equipment on the ground to direct the aircraft to the airfield;” he said.

For an airline that flies five times a day into Kumasi, the impact of cessation of flights on operations and on passengers is tremendous.

“For both Starbow and AWA, we have had serious cash flow problems; Starbow aircraft is a leased one and whether we fly or not we have to pay for the lease and it’s quite costly; we have to pay salaries of staff,” Mr Antwi observed.

For many businessmen and women who travel by air especially to Kumasi, Sunyani and Takoradi the impact of the cessation of flights was quite heavy.

“We have mining and oil companies whose staff leave Accra every morning to Takoradi and return in the evening and so when we had to cancel our flights they all suffered with some of them turning to the roads,” the Starbow CEO recalled.

He hoped that government will through the Ghana Civil Aviation Authority (GCAA) provide the Instrument Landing System (ILS) in Kumasi, Tamale and Takoradi to aid operations.

IATA called on government to come up with the appropriate regulation to secure the industry for growth, pointing out that Ghana and other African nations have an opportunity to enact smarter regulations to enable better aviation connectivity. 

It said implementation of the Yamoussoukro Decision will open up air routes within the continent and provide opportunities for more than 5 million additional passengers a year. 

“Investors will only invest in an industry if they can see the potential for positive returns,” IATA added.