Dar es Salaam. Tanzania Airports Authority (TAA) needs to diversify its sources of income from aeronautical to non-aeronautical revenues to make the sector more competitive, air operators opine.
While non-aeronautical revenues include rental and concessions, advertisement charges, airport parking and VIP services fees and miscellaneous receipts, aeronautical incomes include landing and parking fees, passenger service charges and security levy on air passengers which came into effect on October 1 this year.
The authority’s total revenue in 2017/18 financial year increased by 5.3 per cent to Sh103.03 billion compared with the previous year’s.
The sum is to be channelled into funding airport infrastructure, including security installations and safety services like perimeter fences and scanning machines.
The authority’s finance and business director, Mr Pius Wankali, attributes the performance to the government’s efforts to revive Air Tanzania Company Limited, saying it attracted more passenger traffic and eventually revenues.
“Since 2017, one of the government’s top priorities has been investment in the aviation sector. Its decision to buy four aircraft and lease them to the national carrier is pivotal in increasing passenger traffic and hence revenue collection,” says Mr Wankali.
The state-owned airline is set to deliver two more CS300 jetliners from the Canada-based Bombardier Aerospace next month and another Boeing 787-8 Dreamliner, a family of technologically advanced, super-efficient airplane with new passenger-pleasing features, in 2020.
However, dependency on non-aeronautical streams of revenues is still low: at only 21.8 per cent. That was below the target of 41.5 per cent in the last financial year. The situation left a burden to air operators in the name of aeronautical sources of revenues.
TAA revenue accountant Theresia Kavishe says a delay in opening the Julius Nyerere International Airport terminal three was to blame for failure to meet the target.
“When we were setting that target we had hoped that terminal three would have been ready by last April. As that has not happened, we failed to meet our target,” notes Ms Kavishe.
“With the recent review of contracts with our tenants we can now enjoy a win-win situation. We also bank our hopes on commercial activities at terminal three, whose construction is likely to be completed next May.
“We are now doing all in our power through advertisements and workshops to attract more tenants and advertisers at the authority’s premises.”
TAA targets to improve non-aeronautical income and its growth has been increasing at an average of 16.9 per cent over the past five years. The highest rate of 28.5 per cent was recorded in 2015/16.
Its current rate of non-aeronautical revenues is 21.8 per cent.
If TAA is to meet the target of 41.5 per cent, which it missed during the last financial year, it has to nearly double its current efforts in raising non-aeronautical revenues.
Rental and concessional and airport parking revenue streams lead the way at 82.4 and 7.6 per cent respectively of the TAA’s non-aeronautical revenues.
The global benchmark of non-aeronautical revenue to total revenue stands in the region of 40 and 50 per cent.
The authority, which is mandated for the provision of airport services, ground support, infrastructure and construction of airports, plans to increase its total revenue collection by 30.3 per cent to Sh134.2 billion in the current financial year.
But, the Tanzania Air Operators Association executive secretary, Mr Laurence Paul, says more should be done to attract non-aeronautical revenues to generate higher net profit margins, whilst providing airports with more diversification of income streams which then serve as an additional cushion during economic downturns where passenger numbers may drop.
Mr Paul says TAA would likely be convinced to lower aeronautical charges, making the destination cheaper compared to the neighboring countries.
“I believe that profits driven by non-aeronautical activities make airports attractive to private investors,” he stresses.
“We should rely on non-aeronautical revenues or, air transport, will be costly and to the end result, we will lose to our competitors.”
According to the International Civil Aviation Organisation, revenues generated from non-aeronautical activities often determine the financial viability of airports, stating that any regulatory or economic oversight interventions should be kept to a minimum.
The authority welcomes private investors to undertake projects in public private partnerships.
“We are prioritising our non-aeronautical revenues. We have started with the construction of a four-star hotel and shopping complex at terminal three. As I speak to you, we are conducting a feasibility study,” says Ms Kavishe.