Interview: James Antwi
How can the industry counter the perception that passenger flights are only for the affluent?
JAMES ANTWI: First and foremost, flying is the most convenient way of travelling in the country. Due to the condition of the roads, a trip by car to Kumasi can take up to six hours and a trip to Tamale takes 10-12 hours. Compare this to 30-minute flights that allow people to travel to and from Accra in the same day with ease.
Reducing the price of flights from $200 to $120 also made a significant impact on the affordability and accessibility of flying for the Ghanaian population. For example, following this change in price, Starbow saw passenger numbers increase from 5000 per month to the current 15,000 per month.
What must be done to increase the number of direct flights between African cities?
ANTWI: Some countries are still protecting their local industry and do not make it easy for foreign airlines to operate in the country. A lot of processes are required to secure a permit. Even today it can take years to secure permission to fly into a particular country, though some places, like Nigeria, are more straightforward than others. Luckily, most West African countries are signatories to the Yamoussoukro Declaration. Even so, there is a long process to gain entry that requires multiple inspections, letters and visits to various ministries. Liberalisation of air services in the region will facilitate ECOWAS integration and should improve with time.
Much of the infrastructure for emergency response is present at airports in the region, so safety is not a major constraint for expansion into foreign airspace. Some Ghanaian airlines are also pursuing International Air Transport Association Operational Safety Audit certification. For example, we are aiming to secure this by early 2015, which will lead to opportunities for code-sharing agreements and partnerships, as well as new business from regulated industries like mining or oil and gas. Such measures increase the prospects for domestic carriers to expand their presence in the region.
In the past 18 months, what have been the main challenges to profitability for domestic carriers?
ANTWI: Insurance premiums have gone from GHS400,000 ($153,960) per quarter to GHS700,000 ($269,430) due to currency depreciation. This means we need to increase fares in order to pay for operational costs. But if you increase prices too much, you lose passengers. Airlines in Ghana will need to strike a balance between affordability and cost recovery. We are also looking at going out of Ghana to operate regional flights, and are pursuing a licence to fly to Nigeria that should be in force by the fourth quarter of 2014. Despite the charges incurred by flying into foreign airports, international flights in the region are key for a domestic carrier’s ability to break even.
To what extent does the current size of Ghana’s aviation industry justify a maintenance, repair and overhaul (MRO) base?
ANTWI: MRO represents about 20% of costs for domestic carriers. At the moment, Ghana does not have the necessary capacity, which means airlines have to service their aircraft overseas. Since 2011, we have applied for our own hangar to do maintenance ourselves. However, to date this has not been feasible due to limited space at Kotoka International Airport. The government and the Ghana Airports Company are aware of this and have assured airlines that they will either allocate existing space or build new space in 2014. Individual facilities for each airline are more efficient than a shared area. Furthermore, domestic airlines could allot hangars to foreign airlines operating in Ghana, representing an additional revenue stream.
What role do you see for ancillary or non-ticket revenue streams in the profitability of an airline?
ANTWI: Ghana has not really explored non-ticket revenue to any appreciable extent. This is still a very small market. At this stage in the aviation industry, local airlines prefer to maintain a good customer experience.
Credit: This information was originally published by Oxford Business Group (OBG), the global publishing, research and consultancy firm, appearing in The Report: Ghana 2016. Copyright Oxford Business Group 2016. Published under permission by OBG. For economic news about Ghana and other countries covered by OBG, please visit: http://www.oxfordbusinessgroup.com/economic-news-updates