Update: Article has been updated with industry response to the proposed hikes.
The South African Civil Aviation Authority has proposed a three-year consecutive increase in the aviation fuel levy, commencing 1 April 2024.
This increase will have an impact on business costs for airlines and related industries, which will likely have a knock-on effect on passengers through ticket prices.
Gazetted on Monday (27 November), the SACAA proposed an amendment to the fuel levy determination schedule in terms of the provisions of section 2(7) of the South African Civil Authority Levies Act, 1998 (Act. No.41 of 1998).
It is proposed that the fuel levy increase along CPl determinations for three consecutive financial years commencing 1 April 2024. Based on the forecasted rate, the proposed fuel levy tariff increase would be as per the following table.
|Cents per litre
These increases will be on top of the already hiked levy, which increased by 8.5% in May 2023 after approval from the Minister of Transport with concurrence by the Minister of Finance.
The SACAA noted that these increases are needed to comply with the International Civil Aviation Organisation’s Standards and Recommended Practices (SARPs), while fuel levy income for 2023/24 is forecast to decrease by 2.6% compared to 2022.
It justified the proposed increases in the context of the airline industry slowly returning to normal operations and fuel volumes remaining static.
“With the return of commercial airlines, volumes of freight have shifted from cargo flights to cargo holds of scheduled passenger flights, which does not generate a fuel levy,” the SACAA said.
“Flights in the general aviation and charter business have been impacted severely and are only expected to return to normal levels over the next two financial years.
“Fuel volumes are expected to remain static over the MTEF budget period, while the fuel levy rate has been budgeted to increase in line with CPI,” it said.
Following the latest approved hike in the fuel levy in May, the Democratic Alliance (DA) raised concerns about the ramifications of the increases, particularly on airlines, charters, and passengers.
“The amendment will increase the existing aviation fuel levy, now firmly set at 20.83 cents per litre (May 2023), payable by consumers and wholesale distributors.
“It will indisputably inflate the base costs for these businesses, already grappling with daunting economic challenges. The aftermath is clear and unavoidable: this expense will be shouldered by the passengers,” the party said.
The aviation industry has responded to the proposed hikes, saying that, while the levy is unlikely to have a direct impact on ticket prices, it does increase the overall business costs in the sector.
The DA claimed in May that the amendment and levy hike was implemented without industry consultation, saying that the lack of transparency and engagement “violates the principles of public participation, fundamental tenets of the original Levies Act”.
In February this year, the Department of Transport also gazetted changes to airport tariffs, hiking airport facility costs, including parking, VAT, and passenger service fees.