Airlines will pay more for landing and parking in Kenyan airports after the government introduced a 16 per cent tax on the services in a move that is likely to hurt margins of domestic airlines.
The introduction of VAT on airport fees is contained in the Finance Act, which takes force this year and will increase the cost of landing at the Jomo Kenyatta International Airport (JKIA) in Nairobi, which in recent years has been one the cheapest in Africa compared to Johannesburg, Khartoum and Harare, according to the Kenya Airports Authority.
While it’s sets to boost the coffers of the tax man given the rising number of flights in Kenya, it’s set to hurt the earnings of carriers, especially domestic airlines, who say stiff competition in the industry will not allow them to pass on the additional costs to passengers and cargo users.
Aircraft landing charges are based on the maximum take-off weight of the aircraft with the big planes paying $2,100 (Sh168, 000) for landing and $130 (Sh10, 400) for parking per day. These charges will now increase to Sh194,800 and Sh12,064 respectively.
Domestic carriers such as Jetlink, Airkenya and Fly540 will see landing charges for their midsized planes increase from Sh78, 720 to Sh91,310 with parking fees going up to Sh3, 750 from Sh3, 200.
“Currently, we are not paying VAT on landing and parking, but this going to be terrible for us. The increased fees will hurt us (domestic carriers) most,” said Nixon Ooko, operations manager at Fly 540.
Kenya Airways is set to bear the heaviest brunt of the new charges among the big airlines given the JKIA is its hub, but executives in the industry say the smaller planes will feel the pinch because their small operations.
Airlines encounter several types of charges at airports: landing and parking, fuel, ground handling, navigation and catering. Fuel costs are controlled by the oil companies while handling charges are controlled by the ground handling companies operating within the airport.
Kenya Airports Authority is in charge of parking and landing fees.
Players in the aviation industry reckon that the additional charges could hurt efforts to promote JKIA as the “cargo hub of the region.”
Data from the Kenya Airports Authority indicate that 211,234 aircraft landed in 2009, a 7.2 per cent rise from the 197,138 recorded in 2008 with growth of 10 per cent expected for 2010.