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THE EFFECT of AERONAUTICAL and NON-AERONAUTICAL CHARGES on AIRPORT REVENUE COLLECTION: the Case of Kilimanjaro International Airport

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THE EFFECT of AERONAUTICAL and NON-AERONAUTICAL CHARGES on AIRPORT REVENUE COLLECTION: the Case of Kilimanjaro International Airport This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository THE EFFECT OF AERONAUTICAL AND NON-AERONAUTICAL CHARGES ON AIRPORT REVENUE COLLECTION: The Case of Kilimanjaro International Airport Raphael A. Kiangi MSCF/0051/2019 M.Sc. (Finance & Investment) Dissertation Institute of Accountancy Arusha i This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository November 2020 ii This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository THE EFFECT OF AERONAUTICAL AND NON-AERONAUTICAL CHARGES ON AIRPORT REVENUE COLLECTION: The Case of Kilimanjaro International Airport By Raphael A. Kiangi A dissertation submitted in partial fulfilment of the requirements for the degree of Master of Science in Finance and Investment of the Institute of Accountancy Arusha Institute of Accountancy Arusha November 2020 iii This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository CERTIFICATION The undersigned certifies that he has read and hereby recommends for acceptance by the Institute of Accountancy Arusha a dissertation entitled: The effect of Aeronautical and Non Aeronautical charges on Airport revenue collection the case of Kilimanjaro International Airport. A Dissertation Submitted in partial fulfilment of the Requirements of the degree of Master of Science in Finance and Investment at The Institute of Accountancy Arusha. ------------------------------------------------------- Dr. Moga Jilenga (Supervisor) Date................................................... iv This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository COPYRIGHT This dissertation is copyright material protected under the Berne Convention, the Copyright Act 1999 and other international and national enactments, in that behalf, on intellectual property. I Raphael A. Kiangi should not reproduced by any means, in full or in part, except for short extract in a fair dealing, for research or private study, critical scholarly review or discourse with an acknowledgement, without the written permission of the Directorate of Postgraduate Studies, on behalf of both the author and the Institute of Accountancy Arusha. v This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository DECLARATION I, Raphaeli A. Kiangi do hereby declare that this dissertation is my own original work and that it has not been presented and will not be presented to any academic or non- academic institution, and that to the best of my knowledge and understanding it does not contain any materials previously published or written by another academician except where due respect and reference clearly indicated in this dissertation. Signature…………………………… Date.............................................. vi This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository ACKNOWLEGEMENT I be obligated to the Almighty God for the knack that has given me to work on this research report. The completion of this research report has a remarkable experience by the researcher that is not worth acknowledging without mentioning the role of the key persons for their encouragement. I am so thankful to express my sincere gratitude to all who smoothed the production of this research report. I would like to extend my wholehearted gratitude to my supervisor Dr.Moga T. Jilenga, he persistently guided me since initial stage (proposal) up to the work processing stage (report). If it is a mature and useful report it is because of his quality supervision. Also I would like to express my wholehearted thanks to Dr.Samwel Werema and Dr.Mwaitete for their support during lecture of Research methods for finance and the management of Kilimanjaro International Airport (KIA) for accepting me to collect data for the study. It was good in the sense that I was jovially welcomed and given necessary support by the management and members of staff especially those from Finance & Corporate Service and Marketing. I be obligated my gratitude to KIA Ag. Managing Director Christina Mwakatobe, CPA (T) Mary E. Kimambo Director of Finance and Corporate Services, Mr. Gift Shine and Mr. Gaudence Sigonda who played a very great role in assisting me for the whole period of the research. I say thanks very much to all of them. Finally, my special thank go to my family, relative and friends, who assisted me through constructive ideals, materials and the financial support. I also acknowledge my classmate, Wiston George, Witness Urio, Gloria Magadula, Samwel Saruni and Havashimana Sylvanne for their diligent assistance throughout the period I have been conducting this research report, they have been of great support. Lastly I acknowledge my lovely wife Anna Simfukwe and my lovely child Travis for their tolerance, moral support and understanding during pursuance of my studies especially during the time I spent away from home. They are all cherished for their untiring tolerance. vii This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository ABSTRACT Relating to the international air transportation industry, today as discordant as those pertaining to Airport charges imposed at international airports. Aeronautical and Non-Aeronautical activities obvious are two sides business. Despite recent globalization and liberalization of the aviation industry, in a large number of countries, it is still owned and operated by governments. International Airports in Tanzania such as JNIA and KIA depend much on Aeronautical charges rather than Non-Aeronautical charges to finance its expenditure which is very risk because if no or few flights operate at the Airport means that no or few revenue will be generated. Commercial airports use non aeronautical sources to generate between 35% and 40% of their revenues. There are only 5 out of 58 airports owned and managed by TAA can fully finance their operations. Different countries focused on the challenges facing aviation sector in revenue collection. Also experience shows that International Airports of Tanzania still using social maximization approach instead of using profit maximization approach in generating airport revenue. Most of Tanzanian Airports fail to finance its expenditure efficiently and effectively. Therefore, this study determined the effect of Aeronautical and Non-aeronautical Charges on Airport Revenue collection at KIA, Tanzania. The study aimed to determine the effect of Aeronautical and Non-Aeronautical charges on Airport revenue collection at Kilimanjaro International Airport. The study used case study design in Kilimanjaro International Airport for the period between2010 to 2019. Secondary data were used collected from the management of KIA. Data were analysed using STATA, SPSS and Excel Software. Multiple liner regression was used for prediction. The findings presented using Tables and figures. The study is relevant to all aviation stakeholders. The study reported the variation in airport revenue collection can be influenced by PSC, LPF, RUF and SCF but less influence with SCF. The MLR model for the outcome observed as ARC = 7.66E+07 + 0.723(PSC) + 0.911(LPF) + 3.676(RUF) - 19.449(SCF). This exposes that passenger service charge, landing & parking fee, rental & utility fee and sales concession fee can be used to predict airport revenue collection at KIA. In case of RUF and SCF to predict ARC also the equation for regression model assumption found as ARC= -1.234E+10 + 22.901 (RUF) - 18.378 (SCF).This model presented R2 of 0. 845 imply RUF and SCF is a predictor of ACR explained by 84.5% with Non- Aeronautical charges but the model is not stable for SCF because of negative value. Besides, the study found significant results on Aeronautical charges to predict ARC. The R Square value of 94.2% with p<0.001 shows the model fitness. The regression model is good predictor presented as ARC =669033627.8 + 0.33 (PSC) + 1.533 (LPF) especially for LPF significant indicated with p=0.037 while PSC found to be insignificant at p=0.508. Hence the institution can use both Aeronautical and Non- Aeronautical charges as it has impact in generating revenue. The study discloses that Aeronautical and Non-Aeronautical charges are significance to explain about airport revenue collection at Kilimanjaro International Airport given that almost all covariates had positive coefficient. Consequently, the Airport authority has to be more carefully on the policy decision on how passenger service charges landing & parking fee, rental & utility fee and sales concession fee can be implemented to increase airport revenue collection. viii This Document has officially been Submitted in the Institute of Accountancy Arusha – Institutional Repository TABLE OF CONTENTS Table of Contents CERTIFICATION .................................................................................................................................... iii COPYRIGHT ............................................................................................................................................ v DECLARATION ...................................................................................................................................... vi ACKNOWLEGEMENT ........................................................................................................................... vii
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