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Kenya’s aviation sector is grappling with the fallout of a newly signed Finance Act that industry stakeholders say could push smaller aircraft operators out of the country.
Speaking during the second July edition of AFRAA’s SkyConnect Leadership Dialogues, monitored by Daily Sun on Wednesday, the Chief Executive Officer of Kenya Association of Air Operators (KAAO), Ms. Liz Aluvanze, explained what the Finance Act 2026 means for the industry, from new Value Added Tax (VAT) and levy charges on aircraft under 2,000 kg, to the joint lobbying effort by KAAO, AFRAA and IATA that shaped the final law. She also spoke on why punitive taxation could drive operators and maintenance jobs to friendlier neighboring jurisdictions.
Background
I have the privilege of serving as the CEO of Kenya Association of Air Operators (KAAO), is the national umbrella body of advocacy for Kenya’s civil aviation sector. It was established in 1967 and they are categorised into two main categories: The ordinary category, which is the AOC holders which includes scheduled and unscheduled operators, training organizations, maintenance facilities, remotely piloted aircraft systems operators, and balloon operators. There is also an associated category, which includes insurance firms, fuel marketers, financial institutions, law firms, and everyone else in the larger aviation landscape that supports the business of air transport. Currently, we are 69 members strong, something we’re very proud of.
Achievements in three years as CEO of KAAO
When I took over, I inherited an industry that was very disenfranchised. A lot of members had walked away for one reason or another. I’m proud to say that since I took over, I’ve grown the membership almost threefold, which is why we now represent 90% of the operator landscape here in Kenya.
Another achievement is the tax policy. Over the last three years, we’ve managed to advocate for the removal of taxes that previously burdened the sector. That’s been very positive for us, because it’s contributed to the exponential growth of the industry, more aircraft imported, companies growing and expanding their fleets. A third and very important thing we’ve championed is the rulemaking process at the Kenya Civil Aviation Authority (KCAA). When I took over, regulations were essentially drafted behind closed doors, published, and industry was expected to implement them almost immediately. We’ve championed a rulemaking process where industry participants and experts are now part of developing regulations. As a result, there’s been a great improvement in both developing and implementing regulations, since industry now has a real hand in shaping them.
We have 50 airlines who are part of our membership. The KCAA registry has 78 AOC holders, but in terms of those that are active, we’d say about 54. Of those, 50 are under our membership. In 2023, aircraft movements at Jomo Kenyatta International Airport (JKIA) were about 98,000, with about 6.8 million arrivals that year. For Wilson Airport where we’re based, movements in the same period were about 93,000, with roughly 837,000 passengers handled.
Fast-forward to the 2025/2026 projections: JKIA saw aircraft movements at just over 108,000, with passenger movements at about 7.6 million. Wilson, meanwhile, saw movements at about 99,000 and passenger movements at 923,000. I mention this because you know how small Wilson is as an airport, yet it’s handling traffic almost on par with JKIA. In fact, I’m proud to say we expect Wilson to surpass the 1 million passenger mark this year. So Kenya is seeing a steady increase in movements, averaging about 10% year-on-year, and we hope to surpass that even this year, despite global challenges around fuel costs, ongoing conflicts, and other emerging issues.
Kenya is also quite a dynamic country with many regional airports, the last I checked the KCAA register, Kenya has over 300 registered airports and airstrips.
That’s part of what makes the industry so dynamic; we have many smaller operators running safaris between these airstrips before connecting through Wilson or JKIA. Some are privately owned, some belong to the Kenya Wildlife Service, and some fall under the Ministry of Interior for security purposes. But the ones overseen by the Kenya Civil Aviation Authority as commercially significant are 23.
The third initiative is what we call the Industry Affairs Meeting which is held every three months between KAAO, the Civil Aviation Authority, and the Kenya Airports Authority. We sit down together as stakeholders with the decision-makers. Operators put all their concerns on the table, and we really work through them and when I say “work through them,” I mean it; we go into a room and air out every issue, in the hopes of continually improving our safety culture.
The Industry Affairs Meeting, for example, has been running for about 10 years now. It’s not something we start and stop; we hold ourselves accountable to sit down every three months and discuss whatever is challenging the industry, and to come up with solutions. Recently, we also brought the Accident Investigation Department, under the State Department of Aviation, into that forum, since we felt they’re a critical partner in these conversations. One long-standing industry concern is that final accident and incident investigation reports can take years to be released. So we’re pushing them to conclude investigations and share reports on time, so the industry can review them and continue learning from past mistakes.
For the Industry Affairs Forum, who are the stakeholders involved, and who leads it?
We have KAAO, the Kenya Airports Authority, the aerodrome operator, ideally represented by the general manager or accounting officer, along with other general managers who are also decision-makers. We have the Kenya Civil Aviation Authority, led by the director general, who also brings his accounting managers heading the various departments of the KCAA. The hosting rotates every three months, if I host this month, the Kenya Airports Authority hosts the next, then the Civil Aviation Authority the one after.
The Finance Act
This was probably the submission KAAO is proudest of, because, as you rightly said, we worked jointly with, and were supported by, both AFRAA and IATA. This year’s Finance Bill 2026 was, for our sector, quite punitive. The first major concern was the Value Added Tax (VAT) clause (our standard VAT rate is 16%) and the bill proposed applying VAT to the importation of all aircraft categories, all aircraft parts, spare parts, and related components, as well as direction-finding compasses and navigation appliances.
The bill also introduced an Import Declaration Fee (IDF) of 2.5%, again applicable to all aviation parts and related items, meaning anything related to importing aviation inputs would face this additional 2.5% on top of the existing 16% VAT. It further proposed a Railway Development Levy of 2%, again applied to the same items. Altogether, that would have added roughly 20.5% in additional costs on aviation inputs coming into the country, quite punitive, and clearly unsustainable.
So, we mobilised fully, working with our partners to put together a strong, data-driven submission. This time, the parliamentary committee was notably more candid and firmer, they specifically wanted data-driven documents rather than anecdotes; they wanted facts and figures presented clearly.
What made it into the Act?
Let me start with the positives, then the areas where we weren’t as successful, since we still need to figure out how to address those. On VAT, aircraft in Kenya are categorized into three weight classes: under 2,000 kg, 2,000–15,000 kg, and above 15,000 kg. Anything 2,000 kg and above remains VAT-exempt. Unfortunately, aircraft under 2,000 kg are now subject to VAT under the Act. Direction-finding compasses, appliances, and related equipment are also now VATable under the Act.
On the Railway Development Levy, aircraft under 2,000 kg unfortunately now attract both the levy and the IDF. On the positive side, spare parts classified under Chapter 88 remain exempt from VAT, IDF, and the Railway Development Levy.
The reasoning behind this is interesting. Naturally, we questioned why imposing a roughly 20.5% tax on smaller operators affects the whole industry, given that these are often the foundational players: training organizations and similar operators who rely on that kind of equipment. But the government’s position this time was that with elections coming next year, a lot of the political class tends to import helicopters, and the government needs revenue. Their argument was essentially that the people affected by this tax bracket can afford it while acknowledging our concerns about smaller operators, that’s where things currently stand.
Back in 2022/2023, when I took over, small operators under 2,000 kg used to pay all these taxes, and what we witnessed was a rapid deregistration of those aircraft from the Kenyan registry. Operators are smart. They deregister equipment when the cost of doing business becomes too high, and re-register in friendlier jurisdictions, while still coming back to conduct business here. So what we’re likely to see is few, if any, new registrations of aircraft in that category. Operators will need to find other ways to survive including basing their operations in friendlier jurisdictions. What governments need to understand is that this leads to less revenue collection for themselves. We were able to document this for 2022/2023, and we intend to document it again this year to strengthen our case when we go through this process again in September.
I expect we’ll see maintenance activity shifting to friendlier jurisdictions too. I like to joke that operators will simply fly to a neighboring country, get maintenance done, and fly the aircraft back. Who loses out? Kenya. There’s a real ripple effect we’ll be monitoring closely and documenting, so we can present the case for these exemptions to continue. The Finance Act is the law currently in force. Amending it would mean waiting until around June or July of next year.
