Nasasira (left) receives a flag from Boubacar Djibo, the International Civil Aviation Organisation chief
By David Mugabe
It’s not just Entebbe. All over Africa, governments are debating the future of airports.
In particular, they are trying to determine whether they would come out ahead if they handed management of airports over to private companies.
That became clear during a meeting last week in Kampala of the International Civil Aviation Organisation (ICAO) and Africa Civil Aviation Commission (AFCAC).
At the gathering, some aviation experts argued that privatisation would lead to higher tax revenue – a very appealing prospect to cash-starved civil aviation authorities. But others voiced fears that private contractors would walk away with most of the profits, leaving the government owners worse off than they are currently.
No clear consensus emerged, so governments were left to decide the issue on their own.
One thing is clear, though. African aviation is having trouble getting off the ground.
“Often times Africa’s airports are accused of being expensive and as a result, unattractive to international air operators. Can Africa provide services at the same cost with countries that run stronger economies?,” asked John Nasasira, minister of transport and works.
The situation may get worse before it improves. “We are convinced that sooner or later air passengers will be taxed further to support CAAs, though this may be the right application of taxes, the burden may be too heavy to bear,” said an aviation expert at the three-day gathering.
The problem is that increasing taxes or any other levy is also seen as a major detriment to growth of the industry because it discourages mass travel through low-cost airlines.
Take Uganda for example, a return flight between Entebbe and Nairobi with taxes and other hidden charges costs about $260.
At the peak of business upto last year, Kenya Airways charged as high as $350 until the industry faced a slowdown with reduced passenger bookings. In contrast by bus, although it is a longer and more tedious journey, it costs anything between $25 to $40.
So the choice of the more expensive airline will be left to affluent executives in a hurry to conduct business across borders but at the expense of encouraging mass air travel. The same is happening in South Africa.
It costs $53 to travel by luxury coach (return) between Johannesburg to Cape Town.
Air passenger taxes alone (excluding fare) on the same sector is around $114.
Uganda’s Civil Aviation Authority (CAA) officials think privatisation is not a bad alternative.
With this arrangement, the managing director of CAA, Dr. Rama Makuza explained that a professional team manages the several departments of the airport like cargo and ground handling, collects the revenue and the regulator is paid a percentage of the proceeds.
“We would then concentrate on our core competences of safety and security. “All we will need is to appropriate CAA personnel to monitor the activities of the outsourced company,” argued Makuza.
Opponents of privatisation believe that foreign firms managing the airport would siphon off the profits, leaving the regulator with peanut balance.
“Airports make others walk away rich,” said Raphael Kuuchi, the commercial director of Africa Airlines Association.
A lot of the charges imposed by the group that takes the concession depends on the powers that are given to the regulator and the terms of the contract.
For a concession group may find it easier to control prices if they are dealing with governments than with airlines.
Ultimately, the debate may depend on whether Entebbe airport can attract more business.
And that, in turn, may depend on something that has little to do with privatization – namely, the possibility that Uganda may gain a competitive edge if Uganda is able to refine its oil into low-cost aviation fuel.
But the idea of having cheap aviation fuel is far too down the line since it takes a lot of investment to refine aviation fuel. It remains to be seen whether government sees the viability in this.
