Business News of 2014-08-23

Gov’t seeks majority stake in new national airline

Government is seeking to own at least 51 percent of the proposed new national airline as it begins the search for a private partner following the appointment of PwC as a transactional advisor on Wednesday.

The Ministry of Transport, after a competitive tender process, selected PwC -- an international consulting firm -- to among other issues advise on a private partner, to manage operations of the national airline in line with government’s Public-Private Partnership (PPP) agenda.

PwC is expected to undertake studies to develop various models and evaluate bids for establishment of the new flag-carrier.

The process, which is expected to take 13 months, is being financed by using part of a US$30million PPP programme facility from the World Bank.

Explaining the firm’s mandate to the B&FT, Mr. Felix Addo, Country Senior Partner, PwC, said: “The model, as far as I know, for carrying a national flag on a carrier is that there should be at least 51 percent ownership by government and nationals of the country. So government can have about five percent and the other 46 percent will be owned by Ghanaian nationals. It can be through private placement or through the stock exchange.

“The 49 percent could be private capital from anywhere. The only thing is that 51 percent has to have Ghanaian content.”

Government’s latest attempt to establish a sustainable and profitable airline is the third since independence following the demise of the erstwhile Ghana Airways and Ghana International Airlines due mainly to mismanagement, abuse of power and corruption.

Mr. Addo added: “Running an airline is one of the things that the private sector knows how to do very well. Our attempts in the past to do it (as a wholly state-owned enterprise) didn’t work very well. PwC will be the transaction advisors. It is going to be a combination of pure airline operation and airline consultancy work; it’s going to have a legal part that will come in the form of drafting the concession agreements and making sure that all the legal contracts are done right.

“But we have to make sure that whichever airline we select complies with international regulations and best practices. We will do due diligence on whoever comes in to bid on the concession. We will review, evaluate them and make sure that they can meet the criteria we establish. We want people with the right expertise.”

Since the demise of Ghana Airways and the subsequent utter failure of Ghana International Airlines -- a joint venture between government and private investors -- the idea of a new national flag-carrier has been mooted by various government functionaries.

Ghana Airways was founded in 1958, and for decades was the national airline with Kotoka International Airport (KIA) as its hub. However, the airline, ridden with debt, ceased operations in 2004. Attempts were made to revive its fortunes, but to no avail: in June 2005 it was liquidated.

With the support of private investors, Ghana International Airlines (GIA) was established in 2004 after Ghana Airlines’ demise. The airline faced difficulties and eventually suspended its operations in May 2010.

Shareholders of GIA are still locked in settlement discussions four years after its demise.

Ghana Airways also has some outstanding issues which the parties are seeking redress through the courts. PwC is helping government deal with the issues, and according to Mr. Addo they are at the tail-end of resolving them.

“It is about people submitting claims. We have to validate and prove the claims, but some of the claims we didn’t think were adequately supported. But that is now at the court stage,” he said.

Mr. Twumasi Ankrah-Selby, Chief Director of the Ministry of Transport speaking on the upcoming airline, assured that “What we are trying to do is totally independent of the issues arising from the collapse of GIA and Ghana Airways.

Source: B&FT
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