Study on air space liberalisation in EAC
A study commissioned by the East African Business Council (EABC) dubbed “The Costs and Benefits of Open Skies in the East African Community” and released on May.12 in Nairobi, shows that air liberalisation could lead to a reduction in air fares by 9% and a 41% increase in frequencies, which in turn stimulate passenger demand.
This, the report notes, could result in an additional 46,320 jobs and US$ 202.1 million (Shs 721billion) per annum in the Gross Domestic Product in the five EAC states of Kenya, Uganda, Tanzania, Rwanda and Burundi.
The report says regulatory charges alone account for up to 24 % of air fares in Kenya where airlines have to pay US$50 (Shs 178,530) as departure tax in addition to landing and navigation fees. The industry also faces 16% Value Added Tax on tickets and spare parts in Kenya as well jet fuel tax.
On the other hand, Uganda and Tanzania both charge US$40 (Shs 142,824) as departure tax while Ethiopia and Burundi asks for US$30 (Shs 107,118) and US$ 20 (Shs 71,412) from airlines departing from their national airports, respectively. This is far higher compared with US$17.8 (Shs 63,556) in USA, US$9.73 (Shs 34,741) in Norway and US$9.52 (Shs 33,992) in the United Arab Emirates.
In the case of Tanzania, domestic and international flights share the same tax rate, something that industry players warn could hamper the growth of regional EAC traffic.
Similarly, Kenya charges a navigation fee of US$819.99 (Shs 2.93million) and a landing fee of US$1,750 (Shs 6.25million) on Boeing 777-300ER compared with US$330 (Shs1.18million) and US$1,755 (Shs 6.27million) respectively that Uganda charges on the same aircraft model; and US$360 (Shs 1.29million) and US$1,422.53 (Shs 5.08million) respectively that it pays in Tanzania.
Norway and UAE charges US$896 (Shs 3.2million) and US$105 (Shs 374,913) for navigation, respectively.
Currently, the region’s air demand stands at 2.26million passengers annually, with Kenya taking the lion’s share of nearly a million origin-destination passengers in 2015 (35% of all traffic), indicating that a lot of Intra-EAC is centered on Kenya.
The study shows only 9% of passenger traffic in the region is intra-EAC, compared with 16 % intra-African countries and 46 % between Africa and the outside world, and the rest being domestic passengers.
“Air traffic growth between the EAC countries has been relatively low compared with economic growth, suggesting that other factors, such as regulation, taxes, infrastructure are impeding growth,” states the study in part.
“Over half the routes in the region are operated less than daily, limiting passenger choice and making short duration trips difficult.”
The EAC region currently has 22 flight routes as at the end of 2015. But John Kagoro, the director of airports and aviation security at CAA argues that Open Skies within EAC has limited benefit.
“EAC is just a small region meaning that an airline can’t go to either Zambia or anywhere outside the region with the same privileges… we need to engage other countries so that we extend the journeys,” he told The Independent.
He said there is need to engage more countries to buy into the idea of Open Skies especially those in West Africa and the Arab states so that countries in the region can benefit from the initiative in terms of trade and investment.