Business News of Monday, 15 October 2018 – thebftonline.com
The country has a had a rough time with its 2 national airlines, Ghana Airways from 1958 to 2005 and Ghana International Airlines 2005 to 2010 and have they learned anything?
Ghana Airways has had a long successful history with many different aircraft types starting with the:
1. de Havilland DH-114 Herons in 1958 (No photo of Ghana Airways aircraft)
2. DC-3’s in 1959
3. Bristol Britannia in 1959
4. Vickers Viscounts in 1960
5. IL-18 in 1960
6. AN-12 in 1960
7. B707-420 (RR Conway powered) in 1961
8. VC-10 in 1965
9. DC-9 in 1975
10. DC-10 in 1983
11. MD-11 in 1994
Trouble started in June 2002, when the DC-10 was seized at Heathrow after a British creditor of the airline got a legal judgement in order to recoup some £4 million in unpaid debts, and then it came out that Ghana Airways was some US$160 million in debt, and the airline would require a foreign partner if it were to survive.
The Ghanaian government announced in September 2002 that it had signed a deal with Nationwide Airlines which would see the South African airline taking over the management of the airline, which would have been renamed Ghana Nationwide International Airlines.
Nationwide, which beat out rival British Midland, as part of the deal would not take on liabilities for the debts of the national airline, and the deal was cancelled.
It was announced in June 2003 that British Midland had entered into an agreement with the Ghanaian government for the creation of Fly Ghana Limited.
The company, of which the government would hold a golden share, would operate for an indeterminate period as a separate entity to Ghana Airways, at which time both companies would be merged into a single company to potentially be named New Ghana Airways.
Under the plan, British Midland would supply to the airline an Airbus A330 for use on flights to London, with an additional A330 being utilised on flights to New York City. Additionally, British Midland would operate a Fokker 100 aircraft on the airline’s regional route network, with the DC-10 being deployed on the airline’s secondary international routes.
In July 2004, the United States Department of Transportation banned the airline from operating flights into or out of the United States, whilst investigations were underway that the airline was not up to par on safety procedures.
The banning led to the Ghana Airways board being sacked by the government, and the government taking over full control of the airline.
It was reported in April 2005 that Ethiopian Airlines was negotiating with the government in Accra to help keep Ghana Airways afloat, in a deal which would have seen the government keeping a 25% share in the airline, with 40% being sold off to the Ethiopian national airline and Ghana International Airlines.
Unable to keep up with its debt repayments, and due to the government refusal to pump more money into the airline, Ghana Airways was liquidated in June 2005.
Then on October 2005, Ghana International Airlines (GIA)took to the skies with a leased B757-200 (Ryan International Airlines of the USA, later from Astraeus) under the leadership of American Ralph Atkin (who I had the pleasure of meeting in regard to a position) who started US regional SkyWest along with Mr. Brian Presburg (ex-CEO Kenya Airways).
The airline was 70% owned by the Ghanian Government and 30% by GIA-USA (Ralph Atwood), and initially flew from Accra’s Kotoka International to Gatwick then adding Johannesburg in 2006 and Dusseldorf in 2008.
Sadly the airline shut down May, 2010, Ghana International Airlines had been in the news in recent times for the bad reasons – it has been grounded on a number of occasions, as well its former officials been hauled to court for roles they played in managing the airline??
So that is the sad story of the 2 national airlines of Ghana, are they ready for Ghana Airways II? NO! you need to build up the Accra hub first with many intra African flights, mainly West Africa before you blast off to London, New York, as behind and beyond traffic is a must to fill long haul flights, without it,
Success in long-haul needs economics of density, where a hub creates route density by combining passengers to and from many behind destinations on a single flight, coming from Lome, Conakry, Freetown and going to London and beyond to Dublin, Brussels, etc., and coming back having behind traffic from Belfast, Glasgow, Amsterdam to Accra connecting to Lagos, Cotonou, etc.
This is where Ethiopian Airlines has it tied up in Addis Ababa with 125 destinations!
Then you need economics of scale where you achieve lower unit costs through more aircraft and seats, this is where Ethiopian is also dangerous with 100+ aircraft!
Then you have economics of scope, where unit costs are reduced by producing more of a single product, which can be seen as geographic coverage where each city pair is a different product, just like different classes of service.
IF you think you can do it just surviving on O&D traffic between Ghana and the UK, you will lose lots of money, and you face competition.
Today, ACC (Kotoka International Airport) has long haul flights to BIG European hubs like Paris (Air France), Brussels (Brussels Airlines/LH), Amsterdam (KLM), London (BA), Istanbul (Turkish), Milan (Air Italy) where connections to North America, Asia, South America are available at attractive fares.
Regionally, you have local Africa World Airlines to Abuja, Monrovia, Freetown, Lagos, but also has to compete with Arik Air to Lagos, Monrovia, Rwandair to Abuja then Kigali, Air Namibia to Lagos then to Windhoek, Air Peace to Lagos, Banjul, Abuja, Monrovia, SAA Johannesburg and Washington D.C., Emirates to Abidjan then Dubai, Ethiopian Airlines to Addis Ababa, Kenya Airways to Freetown, Monrovia then to Nairobi, get the picture?
It is a very competitive market, and I do not think many of the new state airline slike Uganda Airlines and Air Tanzania will be successful in the long haul market, and may ultimately fail in due time.
Focus on Africa first, so many opportunities West to East, West to South, Africa needs better connectivity and air access.
The submission of proposals to partner government in the establishment of a new home-based carrier is open to all and will be transparent to ensure the country has a robust business model for the new flag-carrier, Aviation Minister Joseph Kofi Adda has said.
“Ghana wants to establish a new flag-carrier with private sector participation. This will be open to all airlines and aircraft-leasing companies interested in partnering government,” Mr. Adda said at a meeting with airline operators in Accra.
Ethiopian, Turkish, Air Mauritius and Africa World Airlines are some of the major players who have expressed interest in partnering government in this endeavour.
Ethiopian has gone a step further to submit its business plan to the Aviation Ministry and is keenly following the process. Tewolde GebreMariam, Ethiopia’s Chief Executive Officer, told the B&FT on the sidelines of the Routes Africa Conference held in Accra in June: “Yes, we have submitted our proposal and held discussions”.
Turkish Ambassador to Ghana, Nesrin Bayazit, and Turkish Airline management in Istanbul have both confirmed the Turkish-based airline’s interest – having wider connections across the globe than any other airline.
“We are hearing a lot about the national airline in Ghana and that some companies have already been mentioned, and we hope Turkish airlines can be one of those companies. Recently, a national airline has been established with the assistance of Turkish airlines, so maybe we can talk about how we can do the same in Ghana,” Ambassador Nesrin Bayazit said during a courtesy call on the Aviation Minister last month.
Air Mauritius officials also held a meeting with the former Aviation Minister who now serves as the Sanitation and Water Resources Minister, Ms. Cecilia Dapaah, and expressed their interest in partnering government.
The desire to establish a new home-based carrier after the collapse of Ghana Airways—a fully state-owned entity—and the subsequent collapse of Ghana International Airlines, established with private sector participation after the collapse of Ghana Airways, stems from growth in the sector experienced on the continent and the industry’s future potential.
According to the Africa Outlook report for 2018, Aviation in Africa currently supports US$72.5billion in economic activity and 6.8 million jobs, but Africa’s proportion of the global tourism industry is receding – as the continent’s share shrunk from 4.8% of global arrivals and receipts in 2006 to 3.3% in 2016.
Africa’s potential however remains huge, given the increased investment in on-ground infrastructure and substantial growth of the middle-class on the continent.
IATA predicts air-travel growth in Africa will outpace all other regions of the world over the next 20 years, albeit from a much smaller base. Positively, IATA expects 8.0% growth in demand; slightly outpacing capacity expansion of 7.5%.
Additionally, huge investments in on-ground infrastructure, such as expansion of the Arrival Hall of Terminal 2 and construction of Terminal 3 at the Kotoka International Airport (KIA), construction of a new terminal building at the Kumasi Airport, expansion of the Tamale Airport, reconstruction of the Wa airport and construction of a new airport in the Volta regional capital Ho, all require that a home-based carrier which will focus on operating domestic and regional routes is established.
Indeed, Ethiopian Airlines’ CEO, GebreMariam, confirmed that when given the nod ET will combine domestic and regional operations.
The meeting, at the behest of the sector minister who took over from Ms. Cecilia A. Dapaah barely two months ago, was to afford him the opportunity to formally introduce himself to operators and commit to working together with industry players.
He said various issues that were raised at the 2nd Annual Aviation Ghana Breakfast Meeting held in February included: Resolution of concerns raised by airlines in respect of GACL’s insurance requirement before airport passes are issued; and submission of a Memo by the Aviation Ministry to the Ministry of Finance proposing the removal of taxes on aircraft spare-parts among others, are high on his agenda.