Wednesday, September 11, 2013

■ GHANA: Antrak Air mulls quitting Ghana citing market-overcrowding, exhorbitant costs.

Antrak AirThe CEO of Ghanaian domestic operator, Antrak Air (O4), Alhaji Asuma Banda, says he is seriously considering pulling out of the country as the presence of too many carriers on the Ghanaian domestic scene has rendered it almost impossible to operate an airline profitably.

Speaking to Ghana's B&FT news service, Mr Banda said the scene was also affected by the high cost of aviation fuel which, coupled with high MRO costs, poor infrastructure and the cost of doing business, had taken their toll on the industry.
I am thinking very seriously about relocating my business from Ghana because the passengers are not enough for the number of licences they (Ghana Civil Aviation Authority) issue," he said.
In a discourse issued earlier this week entitled "Growth In The Domestic Aviation Industry: Is It Sustainable?" by Kwaku Antwi-Boasiako, the airline's Chief Commercial Officer, a copy of which has been obtained by The African Aviation Tribune, Mr Antwi-Boasiako expands on Mr Banda's claims noting that while the domestic aviation industry in Ghana has seen tremendous growth over the last 2 years, not just in terms of the number of active airlines operating in the country but more importantly, in terms of passenger uplift, the growth has come at a price.

With only two operators prior to 2011, namely Antrak and the now defunct CTK Citylink, the entry of Starbow (S9) and Fly540 (5G) in 2011 and Africa World Airlines (AW) last year has triggered an intense price war that has resulted in the airline's offering uneconomical fares at the expense of the airline's financial well-being.
"Shareholders have had to pump in more cash to shore up losses and effectively subsidize the low fares that customers are enjoying. How long will shareholders of domestic airlines continue to subsidize the growth in the domestic aviation industry? How long are domestic airlines prepared to make losses, even as they continue to offer low fares in order to attract more passengers?"
Mr Antwi-Boasiako also pointed out that when it comes to the type of equipment/aircraft deployed, there is a direct relationship between projected market size/revenue and the level of investment that any airline may be able to make in the domestic Ghanaian aviation industry. As such, with the prospect of little to no return on an investment, any potential shrewd investor would likely choose to invest in the most economical aircraft, not necessarily the most efficient one, in the interests of maximising their profits from the limited market share available.
"Will you invest US$83.6 million in a new A319 and deploy it in a market of 773,000 passengers per annum and charge GHS100 (US$47.62) one-way for a flight of 1 hour? How about acquiring a 20/30-year old stored aircraft for some US$1.5 million, spend another US$1.5 million to ‘sex’ it up? While the GCAA may want airlines to charge US$50 for a flight of 1 hour in order to grow the industry, it should be clear that there is a limit to how much investors are willing to spend for this kind of market."
The lack of adequate airport facilities and above all, functional night time lighting, prevented airlines from operating domestically during nighttime, effectively cutting the aircraft's utilization and its economy.
"Being restricted to 6 a.m. to 6 p.m. operations is highly inefficient and expensive. And while management of airports is the responsibility of the Ghana Airports Company Limited (GACL), the GCAA must equally be concerned about efficiency in the industry. Under Section 2(c) of Ghana Civil Aviation Act, 2004 (Act 678), one of the objectives of the GCAA is “to facilitate efficient aviation operations”. Having more than 4 domestic airlines operating in a market of 773,000 passengers, charging $50 for 1-hour flight and operating from 6 a.m. to 6 p.m. can hardly be described as efficient."
He also rejected a Ghanaian Civil Aviation Authority (GCAA) "request" for local carriers to reduce their fares in response to a 20% reduction in fuel prices on the grounds that even with the reduced cost of aviation fuel, the commodity was still 150% more expensive than in other markets (USD4.79/gallon in Accra vs a global average of USD3.11/gallon).