The aviation industry in Africa, and Nigeria in particular, is grappling with a significant challenge: the heavy burden of multiple taxation. This issue, as highlighted by Captain Ado Sanusi, the CEO of Aero Contractors, is a major contributor to the financial struggles and even demise of airlines operating within the region. The multiplicity of taxes levied on airlines extends beyond the typical aviation-related charges to encompass a wide array of levies imposed by various government agencies, including customs, corporate affairs commissions, and stamp duty taxes. This cumulative tax burden adds a substantial layer of operational costs, impacting the financial viability and competitiveness of airlines. The International Air Transport Association (IATA) corroborates this assertion, identifying Africa as a region where airlines bear some of the highest tax burdens globally. This high taxation environment contributes significantly to the overall cost of doing business in the African aviation sector.
The excessive taxation within the African aviation landscape translates to higher fares for passengers, often exceeding the base airfare itself. In some instances, taxes and fees can represent as much as 60-70% of a $100 ticket, effectively pricing out potential travelers and suppressing demand for air travel. This situation creates a vicious cycle where high taxes lead to reduced demand, further impacting the financial health of airlines. This reinforces the urgency of addressing the issue of over-taxation to stimulate growth and improve accessibility within the African aviation market. IATA’s Vice President for Africa and the Middle East, Kamil Al Awadhi, emphasizes the disproportionately high operational costs faced by African airlines compared to the global average. This cost disparity puts African carriers at a significant disadvantage in the international aviation market.
The high operational costs faced by African airlines are not solely attributable to taxes and fees. Other contributing factors include the elevated costs of air navigation charges, maintenance, insurance, and capital acquisition, which are significantly higher than in other regions. These factors combine to create a challenging operational environment for airlines, limiting their growth potential and hindering their ability to compete effectively. One of the most critical cost drivers is the price of jet fuel, which in Africa can be two to five times higher than what airlines in Europe and the Middle East pay. This exorbitant fuel cost further restricts African airlines’ profitability and competitiveness, requiring urgent solutions to level the playing field.
Beyond taxation and operational costs, other systemic issues plague the African aviation market, including restricted access, limited competition, and constrained capacity. Protectionist policies and restrictive bilateral agreements often limit competition, leading to fewer routes, reduced availability, and inflated fares. The predominance of small operators with limited fleet sizes and route networks further contributes to this issue, as these airlines lack the economies of scale necessary to lower costs and compete effectively against larger international carriers. This combination of challenges significantly hinders the growth and development of a competitive and thriving aviation sector in Africa.
Addressing the multifaceted challenges facing the African aviation industry requires a holistic approach involving various stakeholders. Governments need to reconsider the existing tax regimes, aiming for a more streamlined and less burdensome approach that fosters a healthier aviation sector. Simultaneously, efforts to reduce operational costs, particularly jet fuel prices, are crucial. This could involve exploring regional collaborations for fuel procurement and optimizing supply chain logistics. Further, promoting open skies policies and fostering greater competition within the market can stimulate growth and improve affordability for passengers. Addressing these issues will create a more conducive environment for airline operations and promote the development of a vibrant and sustainable aviation sector.
Finally, empowering smaller airlines through strategic partnerships, mergers, and acquisitions can help them achieve economies of scale, allowing them to compete more effectively. Investing in infrastructure development, including airport modernization and enhanced air navigation systems, is equally crucial to improve efficiency and safety. These comprehensive measures, implemented collaboratively by governments, airlines, and international organizations, can pave the way for a more dynamic and competitive aviation landscape in Africa, unlocking the vast potential of the continent’s air travel market. This will ultimately benefit not only the airlines themselves but also passengers, economies, and regional connectivity.
