‘Surprise’ fuel tax hike could push up flight prices in South Africa

 ·29 May 2023

The Democratic Alliance (DA) has warned that a new notice from the South African Civil Aviation Authority hiking the country’s aviation fuel levy will likely result in higher prices for airlines and their passengers.

On 26 May, the group published an amendment to the South African Civil Aviation Authority Levies Act to increase the existing aviation fuel levy.

The levy is now set at 20.83 cents per litre, payable by consumers and wholesale distributors.

According to the DA, this move will “indisputably inflate” the base costs for airlines already grappling with daunting economic challenges, with costs likely being pushed onto cash-strapped passengers.

“This escalation in levy further complicates the aviation industry’s intricate pricing structures and advanced booking systems. It introduces an additional and unpredictable variable into an already complex equation,” the party said.

“The long-term effects will unquestionably lead to heightened fluctuations in end-user prices, destabilising the industry.”

The opposition party said that the amendment appears to have been enacted without any consultation with industry stakeholders.

The DA said that the lack of transparency and engagement violates the principles of public participation, fundamental tenets of the original Levies Act.

“This approach threatens the very democratic processes that underpin our legislative systems. A unilateral decision of this magnitude undermines the stability of the industry and dismisses the invaluable insights industry stakeholders could provide.”

The DA has called on the minister to explain and justify the decision and reveal the methods behind the levy amendment. Moreover, it called on the South African Civil Aviation Authority to retract the changes.

South Africa’s domestic airline industry has been on rocky footing since the pandemic and liquidation of Comair, which took out 40% of all domestic flight capacity. While the industry has built up more capacity since then, the sector is still clawing back losses made during the Covid pandemic.

Sourcing and storing jet fuel has been a tricky challenge for the airline industry of late, as South Africa lacks oil refining capacity.

Recently there have been significant delays in the import of crude oil, a lack of buffer stock and delayed shipments, among other things, that caused two major airports to reschedule flights for lack of jet fuel.

Over 2022, aviation fuel costs skyrocketed by 80%, and demand increased heavily following a return to domestic travel as restrictions lifted.

According to a recent study by Discovery Bank, these changes in the industry have resulted in ticket prices increasing by 30% to 55% for local flights in 2022, compared to 2019.

Load shedding has not made the situation any easier. On 5 March, the Airports Company of South Africa (ACSA) reported low jet fuel reserves at Cape Town International Airport following load shedding stalled suppliers.

Making travel even more expensive, the Department of Transport in February this year gazetted changes to airport tariffs – hiking the cost of using airport facilities, including parking, VAT and passenger service fees.

The new fee schedule will see passenger service fees increase to R97.38, including VAT, for domestic travel, and up to R266.05 per passenger for travel to other destinations. These are carried directly into the price of air tickets.

Read: Eskom pushing load shedding higher this week – here’s the new schedule

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