Airline tariff increase not yet confirmed

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Plans to increase airline tariffs by 161% over five years have not yet been cemented but airlines are concerned that the increases will go ahead, negatively impacting passenger numbers. South African air travellers are facing a wave of new taxes.

Yesterday Kulula announced it was rising tariffs by 35%, thus “jumping the gun”, according to the Airports Company of South Africa (Acsa). “Their comment is based on a letter whose validity is in question,” Acsa spokesperson Solomon Makgale told Sapa.
“Budget-sensitive travellers will be the hardest hit, as half of airfares will now go towards Acsa’s airport charges”, Kulula said.

In November last year Acsa was granted a 40.7% tariff increase last year, but has not increased tariffs since then. The company wanted to increase tariffs by 132%.
“Acsa successfully challenged the 2010/11 tariffs in court,” said Makgale. “The court set aside the tariffs and ordered the regulating committee to submit the tariff adjustment to the Minister of Transport for consideration and approval. Following the court order, the minister set up a task team to independently assess the proposed permission and advise the minister.
“We understand the task team’s report was finalised and it raised fundamental concerns.” Makgale said Transport Minister S’bu Ndebele had asked for the regulating committee to consider the concerns by the task team and resubmit a revised permission by the end of February.
“Subsequent to that, Acsa received a letter on May 20 purporting to be the adjusted tariffs. We then wrote to the regulating committee (to confirm) whether it had submitted a new permission to the minister for approval in line with the court order. We were made to believe that the regulating committee had not.”

At the moment, any increases are still on hold and Acsa is still charging last year’s tariffs. These amount to R57.02 for domestic flights, R117.54 for regional flights (Botswana, Lesotho, Namibia, Swaziland), and R155.26 for international flights, excluding VAT.

The Airlines Association of Southern Africa (Aasa) said increases could devastate the airline industry and hurt passengers. Aasa chief executive Chris Zweigenthal told IOL that the industry was “extremely concerned” about the increases.
“Following his evaluation of the minister’s request, the regulator maintained the increase of 33 percent, which was implemented in the year 2010/11, following Acsa’s rejection of the original permission when Acsa questioned its legality,” Zweigenthal said. He said the regulator confirmed its determination to increase tariffs by 161% over five years.
“The regulator granted a 40.7% increase for 2010/11, which Acsa did not take due to its legal challenge. However, the regulator has granted an increase of 34.8% in 2011/12 and a 30.6% increase in 2012/13,” he said. “The fourth- and fifth-year increases have remained at 5.6 and 5.5% respectively.”
“The airline industry is currently struggling with the impact of cost increases brought about by tariff increases…increased ATNS [air traffic and navigation services] charges as well as escalating fuel costs,” Zweigenthal said. “We believe that the proposed tariff increases need to be reviewed urgently to ensure the sustainability of the airline industry in South Africa.”

Acsa wants to increase tariffs in order to help pay for infrastructure improvements related to the 2010 Soccer World Cup, including improvements at OR Tambo, Cape Town International and King Shaka International airports.

Around half the cost of a plane ticket actually goes to the airline; the rest consists of a fuel surcharge and taxes including VAT (14%), a passenger service charge, which the airport takes, and a passenger safety charge. If a passenger leaves the country, he or she also has to pay an air passenger tax (departure tax).

As of March 1, the passenger safety charge was raised to R12 per passenger. The Government Gazette of March 25 carried a notice from the South African Civil Aviation Authority (SACAA) proposing the passenger safety charge be increased to R18 per person for the 2011/2012 financial year.

According to the South African National Consumer Union (Sancu), the proposed passenger safety charge increase would cost consumers at least R100 million a year.

The government is planning on introducing a carbon tax from 2012, amounting to R75 per tonne on carbon dioxide emissions. The proposed tax was first announced in December last year and in March the treasury said it was working on plans to take the tax forward.



In addition, the air passenger tax may be raised from R150 to R190 per passenger on international flights and R100 on regional flights, representing a 27% increase on international flights and 25% to SA Customs Union States (Botswana, Lesotho, Namibia and Swaziland). The increased air passenger tax would come into effect from October 1.