The reduction in the price of Aviation Turbine Kerosene (ATK), otherwise known as aviation fuel, makes the price of the commodity in the country the third lowest in the sub-region and may inform airlines to lift fuel in Ghana.
The National Petroleum Authority (NPA) yesterday reviewed the price of aviation fuel by 25 percent; down from about US$3.14 per gallon to about US$2.33 per gallon.
This make the price of the commodity competitive relative to the competition from West African Neigbours Nigeria, Benin, and Senegal.
Given that the commodity is one of the major issues that has accounted for the high price of domestic air travel–aside the imposition of the 17.5 percent VAT last year—the review portends a reduction in airfares to the benefit of travelers in the medium term.
The Ghana Revenue Authority (GRA) in July 2015 implemented the 17.5 percent Value Added Tax (VAT) that was approved by Parliament in the 2013 budget amidst protest from domestic airlines.
Currently, a one-way ticket from Accra to Ashanti Regional Capital, Kumasi sells for about GH¢335. Of this amount, GH¢60 constitute Value Added Tax (VAT) and GH¢5 as airport tax.
Following a series of petitions to the Ministry of Transport by domestic airlines, the supervising ministry formally engaged the Finance Ministry to see how best to address concerns of the industry.
The domestic airline industry is relatively young, given that those currently operating flights from Accra to the four major domestic destinations are just three years old.
The initial buzz that characterised domestic air travel and saw many more people choosing air travel as opposed to road travel, after licencing more operators, has since been contained by challenging economic conditions which have seen a significant reduction in the purchasing power of consumers.
The current load-factor is relatively poor, irrespective of the fact that Antrak has suspended its flights for operational reasons.
With the current review of the price of aviation fuel by the government in consultation with the NPA, a review of the 17.5 VAT on domestic air travel will lead to a sharp drop in airfares to the benefit of passengers.