The ongoing legal wrangle surrounding proposed increases in airline passenger taxes, which will almost double if they are approved, shows the need for a permanent regulator, according to the Democratic Alliance. The official opposition says the tariffs are economically unviable and has asked the minister of transport to set up a permanent economic regulator to determine annual air travel tariffs.
“The proposal by the aviation economic regulator to increase passenger service charges by 161% over the next five years will have a negative effect on passengers, the airline industry and tourism in general,” said MP Stuart Farrow, the Shadow Minister of Transport, in a statement issued last week.
“At a time when airfares have been declining while air travel numbers have grown, it would be hard for airlines, already hit with rising fuel costs, to absorb this type of increase. The effect of this increase means that passengers will be expected to pay nearly double the current R42.61 for domestic travel and R104.30 on overseas travel. The Democratic Alliance (DA) believes that this proposed increase is not only inappropriate, but is the product of an unviable economic regulation system that does not prioritise the best interests of all stakeholders,” he said.
The Airlines Association of Southern Africa (Aasa) said tariff increases could devastate the airline industry and hurt passengers. Aasa chief executive Chris Zweigenthal said the industry was “extremely concerned” about the increases.
“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.”
“The DA has, for some time now, been concerned about the ad hoc arrangements currently in place to determine how tariffs are set for the Airports Company South Africa (ACSA) and the Air Traffic and Navigation Services (ATNS). Due to the nature of authorization in the ACSA Act and the ATNS Act, the tariffs are determined by the bottom line of these two agencies, rather than rational economic planning based on international best practices. The proposed increases that this temporary regulating body has put forth unfairly prejudice passengers who must now bear the brunt of the substantial FIFA 2010 World Cup capitalization programmes that took place at all our airports.”
Consequently, the DA has written to the minister of transport, S’bu Ndebele, regarding tariffs and other matters relating to the aviation sector. In particular, the DA has requested the establishment of a permanent economic regulator that can determine annual tariffs for ACSA and ATNS.
“Unless a permanent economic regulator is established by Parliament, with clear operational guidelines, ACSA’s already tenuous financial position could be dealt a further blow,” the DA says. “The DA calls on the minister to act swiftly in resolving this matter to ensure that South Africa remains a premier destination for air travellers.”
The DA’s proposal comes amidst plans to increase airline tariffs by 161% over five years, but these have not yet been cemented. Nevertheless, airlines are concerned that the increases will go ahead, negatively impacting passenger numbers.
“Budget-sensitive travellers will be the hardest hit, as half of airfares will now go towards Acsa’s airport charges”, Kulula said this week.
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%.
South African air travellers face a variety of new taxes and increases on old ones. As of March 1, the passenger safety charge was raised to R12 per passenger and the South African Civil Aviation Authority (SACAA) has proposed this be increased to R18 per person for the 2011/2012 financial 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.