Airlines shun fuel over taxes

The taxes in the cost build-up of aviation fuel sold in the country makes it the most uncompetitive in the sub-region, and this needs to be reviewed, Charles Asare, Managing Director of the Ghana Airports Company, has said.

While the specialised fuel is sold for about US$2.30 cents per litre in Nigeria, US$2.30 in Benin and US$1.94 cents per litre in Cameroon, it is sold for close to US$3.14 cents per litre in Ghana.

“Ghana sits as the most expensive aviation fuel market within the sub-region. We have data which shows that international traffic has increased by 100 percent within the last five years. But then, there hasn’t been a comparable increase in the aviation fuel that foreign airlines are buying. That leads us to conclude that they are using here as a top-up or re-fuelling in other airports. Aviation fuel uptake is just 10 percent. That is not aligned to the traffic we see,” he said.

He was speaking at the 3rd Annual General Meeting of Ghana Airports Company Limited in Accra.

“In Ghana, there are all kinds of cost build-up in the aviation fuel. In there is the stabilisation tax, and other taxes that are not directly related to aviation. We believe the elimination of that will actually reduce the cost of fuel. Fuel is the largest component of aviation expenses,” he said.

The company, during the year in review, invested in totally resurfacing the Kumasi Airport; expanded the Kotoka International Airport (KIA); and secured a US$150million loan for the construction of a new airport in Ho, Volta Region, and rehabilitation of the Wa Airport in the Upper West Region.

“Here we are as an Airports Company opening up the aviation sector. We want people to travel by air, but if it’s out of the reach of the market then it will beg the question: ‘why the additional infrastructure?’ We believe we are in a growth industry and we rather want to encourage people to use it. We believe the industry needs more attention in respect of the VAT and aviation fuel tax,” Mr. Asare said.

The Airports Company finances improved from a profit of GH¢19million in 2013 to a net profit of GH¢184million in 2014 — largely on the back of retained Passenger Service Charges.

The promulgation of the Airport Tax Amendment Act in 2013 allowed the GACL to retain 100 percent of its revenues, which was hitherto shared with central government. That is what has given impetus for the airports manager to utilise private capital for improving aviation infrastructure in the country.

The company has set up a special fund solely for airport infrastructure, where 70 percent of the revenue from its Airport Passenger Service Charge (APSC) is kept to service loans secured.

“Consistent with the policy directives, we will pursue appropriate strategies to continue growing non-aeronautical revenues of GACL and increase its percentage contribution to the total revenue by 30 percent with the next five years.

“We will continue to pursue opportunities in commercial real estate such as offices, hotels, malls, retail shopping malls, entertainment centres, car parks and other airport-related development on the landside of our airports,” he said.