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Covid-19 robs Tanzania airports of Sh40 billion in revenue

Thursday January 21 2021
covid pic

An aircraft touches down at Dar es Salaam’s Julius Nyeyere International Airport. A significant drop in air passenger traffic has resulted in a 40 percent fall in airport revenues in the country in 2020 due to the adverse impact of the new coronavirus pandemic, according to various official reports. PHOTO | FILE

By Alex Nelson Malanga

Dar es Salaam. Airports’ domestic revenues will drop by 40 percent in the 2020/21 financial year compared to the preceding year due to the Covid-19 pandemic which disrupted the aviation sector, The Citizen has learnt.

During the 2019/20 financial year, the Tanzania Airports Authority (TAA) garnered Sh98.6 billion in revenues, according to the authority’s director general, Julius Ndyamukama.

TAA manages and operates 58 airports across Tanzania.

“The current business trend is not very promising. We cannot hit the 2019/20 performance,” Mr Ndyamukama told The Citizen.

“Revenues will go down as a significant drop in air passenger traffic is projected to be registered.”

The aviation industry was brought to a virtual halt in April last year following lockdowns imposed in many countries from the second-half of March 2020.

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McKinsey Global Institute - a global management consulting firm that serves leading businesses, governments, non-governmental, not-for-profit organizations - said in its recent report that almost 60 percent of the global air fleet was grounded in early April 2020.

The 40 percent drop projected to be registered by the end of the current fiscal year suggests that TAA will lose some Sh39.4 billion.

TAA gets its revenues from two sources, namely: aeronautical and non-aeronautical charges.

Stakeholders advocate for the latter with a view to making air transport relatively cheaper.

Non-aeronautical charges means charges levied by an airport in consideration for the various commercial arrangements it makes in relation to the granting of concessions, and the rental or leasing of premises.

Aeronautical charges such as those for landing, parking and departure are charges paid for services or facilities directly related to the aircraft and their passengers and cargo in connection with facilitating the journey.

The landing charge per 1,000-kilogramme aircraft at Dar es Salaam, Kilimanjaro, Zanzibar and Pemba airports stands at $5.

Parking charges for aircraft of up to 20,000 kilos stand at Sh1,000 and $6 per 12 hours for airlines registered in Tanzania and foreign ones respectively. Departure taxes for domestic and international travellers are Sh13,000 and $49 in that order.

TAA is now doing all in its power to diversify airports’ revenue streams beyond aeronautical sources to make Tanzania more competitive as it offers chances for cutting air transport costs and increase the customer experience at airports

Mr Ndyamukama said the authority’s plan on card was to increase the share of non-aeronautical revenues to 30 percent this financial year, up from 24 percent realised during the previous year.

“We are optimistic to achieve the plan,” he exuded optimism, banking his hopes on promoting business and adverts at airports as well as improving infrastructure, car parking systems in particular.

On adverts, he said, they were working on adverts that will pick in the near future. It is the goal of TAA to enhance non-aeronautical revenues through involvement of the private sector to take part in various projects and opportunities. As it happens, several projects have been identified and are open to participation by strategic investors.

Some of identified projects are state-of-the-art hotel, a modern shopping complex, and development of landslide commercial activities at Julius Nyerere International Airport (JNIA), as well as Mwanza, Songwe, Mtwara and Arusha airports.

The modern airport operator, which has been propelled into a dynamic and competitive landscape, has moved away from being a mere infrastructure provider to a diversified and complex business that operates strategically within the air transport value chain. Rental and concession income as well as car parking are currently the main non-aeronautic contributors for Tanzania’s airports and many other airports in the world.

According to the Airports Council International (ACI), non-aeronautical revenues can be a source to help recover operating costs and reduce the use of aviation taxes for future airport development.

Globally, a net loss of $38.7 billion is expected in 2021 (deeper than the $15.8 billion forecast in June 2020), according to the International Air Transport Association (IATA).

Passenger numbers are expected to grow to 2.8 billion in 2021.

That would be a billion more travellers than in 2020 - but still 1.7 billion travellers short of 2019.


Challenges to recovery

While the industry will see improved performance in 2021 compared to 2020, the road to recovery is expected to be long and difficult.

Passenger volumes are not expected to return to 2019 levels until 2024 at the earliest, with domestic markets recovering faster than international services.


Confidence

“With the continued financial support of governments to keep airlines financially viable and the use of testing to enable travel without quarantine, we have a plan to overcome the worst immediately,” the IATA CEO Alexandre de Juniac said in a statement posted on the association’s website. “And longer-term the progress on vaccines is encouraging. Most importantly, people have not lost their desire to travel.

He said the market response to even small measures to lift quarantine is immediate and strong.

Mr de Juniac added that where barriers have been removed, travel rebounded.

“The thirst for the freedom to fly has not been overcome by the crisis. There is every reason for optimism when governments use testing to open borders. And we need to make that happen fast,” said de Juniac.

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