American economist Mark Skousen once said that the higher the tax level, the greater the failure. This assertion is quite true to Africa’s aviation industry whose growth has been mainly stifled by exorbitant taxes. Take aviation fuel, for example. Due to the high taxes, a gallon (four litres) in Africa costs up to $3.78, which is more than twice the world average of $1.40. That 24,230 litres are needed to fill an Airbus A320 means that an African airline spends $24,192, which is $15,232 more than the world average of $8,960.
In addition, high passenger taxes and charges also continue to bedevil the continent’s aviation industry. For instance, international passengers departing from most African airports are charged between $30 to $89, according to the African Airlines Association.
The high taxes and other charges make it very expensive to run an airline in an already challenging environment. So, in order to cope with the huge running costs, African airlines sell tickets at prices that are way beyond the means of the majority of Africans — subsequently making air travel the preserve of the continent’s upper class.
This explains why, even though Africa is the second largest continent that is home to about one billion people, it only accounts for a paltry three per cent of the world’s air traffic. With a small clientele base, high poverty rates, poor safety records and exorbitant fuel taxes, it’s little wonder that Africa’s aviation industry is currently in limbo, with the majority of the continent’s airlines posting losses year after year.
In 2015 alone, the International Air Transport Association (IATA) reported that African airlines made a combined loss of $100 million, and Africa was the only region in the world to post losses. To put it in context, while European airlines make a profit of 9.69 cents from each passenger they carry, African airlines, on the other hand, lose $1.50 cent on each passenger.
Like John Mirenge — the chief executive officer of RwandAir — noted during the recently concluded Aviation Africa conference that was held in Kigali, running an airline business in Africa is indeed “not for the fainthearted”.
During the conference, delegates called on African governments and their agencies to scale down on aviation taxes if the industry — which they believe has immense potential due to Africa’s growing middle class — is to grow.
“We need to see governments reviewing taxes on fuel, air tickets and transport charges,” said African Airlines Association secretary-general Elijah Chingosho.
Currently, about 80 per cent of all international travellers to Africa use non-African airlines, which means that African airlines are still facing stiff competition from foreign carriers that operate from regions where running costs are relatively low due to lower taxes levied on the industry in their regions.
Industry experts believe that Africa’s aviation industry can only flourish if governments control taxes on fuel and other airport charges.