Air-tickets in Georgia Cost Less than their Tax

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The FINANCIAL — The tax share of total air ticket prices in Georgia are sometimes twice as much as the cost of the ticket. Prices are increasing along with the number of dissatisfied travellers.

 

The recent entrance of budget airlines has not influenced prices as much as was predicted. Airlines remain luxury transport in Georgia until such time as demand increases sufficiently. Latest data shows that the number of travellers increased in 2011 due to some improvements in tourism infrastructure.

A flight to Chisinau via Kiev last week cost 646 GEL, from which the fare was just 177 GEL whilst taxes made up 469 GEL. A flight to Istanbul by Turkish Airlines costs 533 GEL, from which the fare is 310 GEL and tax – 223 GEL. A flight to Milan via Istanbul is: fare – 400 GEL and tax – 409 GEL.

A flight to Berlin via Riga costs 509 GEL, 210 GEL for the fare, and 299 GEL for tax.

The high cost of airport service charges caused President Saakashvili’s to be discontent last year. In November 2011 at the opening ceremony of Kutaisi’s airport rehabilitation process the Georgian President stated that airport taxes are not flexible enough. He said that airport service charges are high, total ticket cost is increasing and low priced companies cannot enter the Georgian market as a result.

Major airports in Georgia are operated by TAV Georgia, which is owned by TAV Airports Holding, the leading airport operator in Turkey. TAV Georgia was awarded with the Golden Brand Award – The most influential Business Award in Georgia, during the annual Golden Brand Ceremony, commonly known as the ‘Business Oscars in Georgia’.

Mete Erkal, TAV Georgia General Manager, told The FINANCIAL that TAV’s share in total taxes which are added to air-ticket price is about 18%. This rate has never been changed, Erkal said.

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“TAV Georgia considered President Saakashvili’s comments to be an appreciation of the high quality and uninterrupted service provided in Tbilisi International Airport. As regards to the taxes of our airport, TAV Georgia’s charges are below average among the main airports in the Caucasus region,” Erkal stated.

Constant expenses (a/c lease fee,
maintenance, crew, etc.)

3,000

USD

Security

750

USD

Navigation

1,000

USD

Fuel

12,500

USD

Catering

1,000

USD

TAV

4,000

USD

TOTAL

22,250

USD

 

“Our charges have never been increased. Despite the fact that there was a cumulative inflation rate of 45% in Georgia from 2007 till today, TAV Georgia did not increase any charges. In addition, in order to keep commercial activities alive, after the problems in 2008 that the country faced, TAV Georgia gave more discounts to commercial areas in the terminal and to the handling rates of air carriers,” Erkal said.

Mr. Erkal mentions that all airlines and customers are treated equally and get quotations according to their flight frequencies. “It is the same application all over the world,” he said.

The following table shows details of the approximate cost of service for a flight from Tbilisi to Munich on a Boeing 737-800 type aircraft with 100 passengers on board. It’s obvious that fuel takes up the largest share of taxes. The increase of fuel price significantly affects the total cost of air-tickets, while other taxes are less obvious.
“It should be noted that several other items like advertisement, airline office expenses, agencies’ ticketing commission, airlines’ profit etc. have to be added to reach the average ticket price. TAV Georgia believes that there are many ways of increasing business activities in the aviation industry. Countries can increase visitor activities by supporting tourism, business environment, etc… And the past years’ 29% increase in passenger figures show that Georgia attracts many people, and the Georgian authorities are very successful in their policies.”

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TAV Georgia served a total number of 1,058,679 passengers in Tbilisi International Airport last year. The number of international passengers that departed from Georgia was 521,492 and arrivals – 510,375. The number of domestic passengers that departed from Georgia was 13,527 and arrivals – 13,285.

In January 2012 TAV Georgia served 78,994 passengers whereas 63,359 passengers were served in the same month of last year. There is 25% increase in passenger figures in January 2012 compared to last year.

“The numbers show that Georgia’s rates are good enough to attract more passengers,” Erkal said.

“Unfortunately the aviation industry has complex dynamics cross-effecting each other, which have to be monitored and managed professionally. Besides, the integrity degree of a country should also be assessed properly to determine the effects of a “predicted global recession”. TAV Georgia has a highly qualified management team conducting business in the airport, as well as on international platforms. Eleven new airlines, including two low cost carriers, started operations to Tbilisi International Airport since summer 2010; resulting in 17% increase in 2010 and 29% increase in 2011 in passenger figures. One has to remember that average growth rates were between 8-9% both for the Caucasus region and for the whole world. In line with the existing marketing strategies, detailed analyses still indicate a strong growth rate – very likely to be a two digit number – for 2012. Therefore TAV Georgia does not think that the number of passengers will be reduced in any case,” Erkal told The FINANCIAL.

 

 

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