By Matthew Lester (Tax Talk)
Executive summary (SAIT Technical)
Prof Lester discusses the impact of the 1time failure on Grahamstown and the Eastern Cape. The airline brought 100,000 people to the Eastern Cape every year. The remaining alternative is SA Express at twice the price. This will likely cost Grahamstown parents an additional R10,000 per year.
SOME say Colonel John Graham was only joking in 1812 when he proclaimed that Grahamstown be established in a barren valley. Maybe. Or perhaps he just wanted his sons to attend St Andrew’s.
For more than 100 years students travelled to Grahamstown by train. The trip was purgatory. But in recent years the city of saints has prospered, not only through educational excellence but also due to cheap airline tickets to the Eastern Cape.
Gone are the days when students returned home twice a year. Today, with half-terms and state occasions, many commute up to eight times a year.
Or parents fly in for rugby matches and "balloon weekend” raves at the nearby coastal resorts, thus boosting the local economy.
But now 1time is gone. So instead of a 45-minute, R900 flight from Cape Town, it costs nearly twice that for the same experience in an SA Express turboprop that takes 90 minutes.
I reckon the loss of 1time could easily cost many Grahamstown parents an extra R10,000 a year.
In all, 1time was bringing more than 100,000 passengers a year to the Eastern Cape. How many will now just stay at home?
This is significant in the context of a poorer province that has 17% of the population but pays only 7% of personal income tax.
We desperately need to encourage discount deals for South Africans to holiday at home and spread their wealth around. Without them the future of the poorer provinces must be bleak.
The demise of 1time was not only due to fuel and operating costs. And inquiries should not stop at how many passengers have been left stranded. Why does it seem that all efforts to establish a discount airline in South Africa fail?
VAT on domestic air tickets cannot be avoided. But does it have to be compounded with departure taxes?
Airports Company South Africa (Acsa) continues to impose huge airline and passenger charges that make a significant contribution to the decline and exit of discount airlines.
Perhaps Acsa should realise that there is more to business philosophy today than Milton Friedman’s "the social responsibility of business is to make a profit”.