(Kenya) – The Kenyan government has proposed a reduction in taxes and levies on the aviation sector in a bid to make air travel more affordable and improve the competitiveness of local airlines. The move comes as a response to concerns over the high costs imposed on air operators, which are ultimately passed on to passengers in the form of increased fares.
A recent survey conducted by the East African Business Council (EABC) reveals that taxes and levies now account for up to 24 percent of the total air fare. For instance, a domestic flight from Nairobi to Kisumu with a budget airline like Jambojet costs approximately Sh7,100, with taxes and levies taking up about Sh1,500 of the fare, or 21 percent. Regional and international flights are even more expensive, with departure fees for these routes reaching up to Sh6,467 (about $50).
Kenya’s new aviation policy, introduced under the Ministry of Transport, aims to address these issues by cutting the taxes that currently burden the industry. These include import duties on materials required for the maintenance and repair of aircraft, which are often taxed up to 25 percent. In addition, airlines are charged value-added tax (VAT), import declaration fees of 3.5 percent, and the railway development levy.
This heavy tax load on air operators is seen as a hindrance to the competitiveness of Kenya’s aviation sector. Airlines often pass these costs onto passengers, making air travel in Kenya more expensive than in some other East African countries. In addition to taxes on flight tickets, Kenya’s aviation sector is also burdened by a series of other charges, including air passenger service charges (APSC), air navigation service charges (ANSC), and the fuel levy imposed by the Kenya Pipeline Company (KPC).
The Kenyan government has acknowledged that these high costs contribute to the country’s uncompetitive position in the region’s aviation market. Kenya Airways (KQ), for example, has been identified as having some of the highest ticket prices on routes where it faces competition, often charging more than airlines like Ethiopian Airlines, South African Airways, and Air France. The African Competition Forum (ACF) has warned that Kenya Airways risks losing market share to cheaper rivals unless the government takes action to reduce air fares.
To address this issue, the new policy aligns with recommendations from the International Civil Aviation Organization (ICAO), which has urged countries to lower aviation taxes as a way to stimulate demand for air travel. ICAO defines aviation taxes as levies applied by states to generate revenue for non-aviation purposes. Such taxes can harm the competitiveness of the air travel sector, especially when the revenues generated are used to subsidize alternative transport systems like railways, which is the case in Kenya.
The government is also working on measures to prevent double taxation for Kenyan airlines, particularly in the context of international travel. In addition to the taxes mentioned above, airlines also face other levies, such as landing and parking charges, aircraft handling charges, and boarding bridge fees. These fees are part of the broader cost structure that airlines must navigate, making it difficult for local carriers to compete on price with international airlines.
The government’s proposal to reduce these taxes, which includes lowering VAT, import duties, and other fees such as the railway development levy, aims to make local airlines more competitive and encourage greater investment in the sector.