Domestic airports? are increasingly being built, including Ambrolauri Airport (14 million GEL investments) and Mestia airport (20 million GEL investments); Government additionally announced plans for setting up a domestic airport in Akhalkalaki, Tusheti, Zugdidi and Omalo.
Despite the mentioned projects, the actual situation hampers growth and development of domestic air companies. ServiceAir is really an only company that performs domestic flights from Natakhtari airport to Mestia and Ambrolauri Airports. The business is subsidized from state budget, simply because this direction of aviation seriously isn’t profitable. Other airlines do not show need for domestic flights. High tax rates at Tbilisi and Batumi airports make these directions unattractive for Georgian air companies.
Fuel price and further taxes frustrate the development, specialists noted. Airlines buy fuel without customs clearance for international flights they usually never pay 18% VAT in this instance, while airlines need to buy fuel with 18% VAT and excise tax for domestic flights.
For example, now of course airline buys fuel without customs clearance for international flights and pay VAT, the price tag on lots of fuel is 1 000 GEL, even though the airline is required to pay excise tax (440 GEL for any ton)? and 18% VAT for domestic flights.
Consequently, international flights are usually more interesting regarding commercial aspects, as compared with domestic flights. Moreover, domestic airlines serve such social objectives as tourism sector promotion, fixation of domestic population in regions, therefore, this direction isn’t interesting for investors.
To neutralize these uncompetitive conditions, as a consequence of contrast between fuel prices for domestic and international flights, and promote growth and development of domestic? and small aviation sectors, yesterday Pm Giorgi Kvirikashvili announced plans for amending Tax Code, under which section of aviation fuel for domestic flights will probably be exempted from VAT and excise taxes.
“Domestic aviation is a subsidized field. Therefore, we’ll exempt that portion of aviation fuel for domestic flights from VAT and excise tax”, the optimal Minister said.
It must be also noted that Government subsidizes the money necessary for domestic flights. After planned amendments, prices will decline along with the demand raises for domestic flights. Due to this fact, these 4 elements can create preconditions for domestic aviation development.
Giorgi Chogovadze, head of National Tourism Agency, also expects ticket prices for domestic flights to shrink. Promotion of domestic aviation is a part of tourism sector development policy promulgated by Government of Georgia, Chogovadze noted.
Government’s initiative will propel cheapening domestic flights and beginners will be on Georgian aviation market, Chogovadze noted.
Agriculture flying machines and tourism helicopters also face a similar problems. Besides fuel, the mentioned tax represents lubricants which might be widely used by flying machines, especially, helicopters.
For domestic flights, its prime price is added an excise tax of 440 GEL per ton and VAT tax, that constitutes 18% of total price of the product. This signifies a state budget will not receive 620 GEL for each domestic flights an average of, after removal of the mentioned taxes.
Frequency of domestic flights is the one other issue, because ticket pricing is most likely to decline. Therefore, the requirement for domestic flights boosts and frequency of flights may grow.
It is also necessary? to put strict control on fuel that will be bought for domestic flights, mainly because it is going to be exempted from VAT and excise taxes, and also this class of fuel be taken for illegal purposes.
It need to be noted that your contract with ServiceAir airline that performs domestic flights will expire soon and Government has now announced tender for performing domestic flights for the Four years, including towards Racha-Ambrolauri direction.
Keti Aleksidze, head of Airports Association says that the schedule of the flights have been already prepared before summer months.
“We perform domestic flights to Mestia direction, Mestia-Kutaisi direction, to Ambrolauri. Now, the schedule of flights has long been prepared before summer. The tender value is concerning Ten million GEL, excluding VAT. However, we simply can’t say just what trade price might be. Tickets sales prices will be deducted”, Aleksidze noted.