General News Mon, 17 Sep 2001

Ghana Airways Hit Hard

Losses are mounting for airlines around the world, and the bankruptcy of some carriers is looking increasingly likely, following the terrorist attacks on the US.

The European Union said on Friday that it feared the attacks could have serious consequences for the air transport sector, adding that it will monitor events to avoid a crisis in the sector.

Share prices of airlines have fallen sharply since the attacks as brokerages and credit agencies have cut their financial outlook for the firms.

Carriers themselves have begun to issue initial statements of their expected losses. Back in Ghana, the national carrier, Ghana Airways which operates twice weekly flights direct to the United States has canceled all its flights, leaving many passengers to wait for the airline's next move. It is not known how much the distressed airline is losing, but it would certainly run into the millions of dollars.

At the time of going to press last Friday, the Chairman of the Board of Directors of Ghana Airways, Dr. Sam Jonah was in a marathon meeting with Ghana Airways staff to devise strategies on the way forward. As part of the cost-cutting measures introduced by the new board, certain allowances were cut by 30%. With the US tragedy, staff of the national carrier are now pressing for the restoration of some of the allowances.

The Accra Mail has learnt that world airlines are now taking their staff welfare with more seriousness than ever. This will no doubt add to operational costs and hike up air fares. Ghana Airways aircrew are considered among the best in the world and once air bound, their in flight service is excellent.

The International Air Transport Association (IATA) has estimated that last week's flight cancellations alone will cost the air industry US$10bn.

On top of the cost of at least a week of severe disruptions, airlines are likely to face a sharp decline in passenger numbers over the next months.

The air industry was already under financial pressure before the attacks, because of a slump in demand due to the economic downturn and high jet fuel prices.

The short-term losses springing from the severe disruption and cancellations over the past week could eventually seem small in comparison with the losses from dwindling demand for tickets.

A number of airlines will probably collapse, there will be a period of consolidation and the air industry in four to five years time will look very different to how it does today.

US airlines are planning for falls in demand of 30-50% during the next six months, Chris Avery, aviation analyst at JP Morgan told the Financial Times.

Grounding aeroplanes, rather than flying empty seats around the world, may be one of the ways which airlines can try and save costs.

Asian airlines - which were already in financial difficulty and who fly a heavy proportion of transatlantic flights - are also expected to be hard hit.

US routes account for as much as 25% of all business of many Asian carriers, and All Nippon Airways has said that it is losing 60m yen ($502,200) a day on the cancellations.

Korean Airlines said its immediate revenue loss stemming from attacks was 15bn won ($11.5m) while the country's second-ranked Asiana Airlines put its losses at about five billion won.

Korean Air shares fell 6% at the close on Friday and Asiana dropped 11%.

Taiwan's largest carrier China Airlines, which derives 20% of its revenues from Taiwan-US routes, fell 7%.

And Asia's biggest listed airline, Singapore Airlines, shed nearly 6% of its value.

In the near term US airports will be near paralysed, because they will go overboard on security.

The US has already introduced new measures including strict screening, a ban of checking in baggage outside the airport, and a total ban on knives and scissors.

Tighter measures are likely to follow, with America's IATA saying it would like to see as many airlines as possible to introduce scanning systems which identify passengers by palm-prints or the iris of the eye.

Delays in processing passengers will slash terminal capacity, probably forcing the busiest airports to scale down their peak-hour operations, according to analysts.

Studies have shown that even a one-minute delay for the average passenger could significantly cut terminal capacity.

"I think in the near term you are going to see US airports will be near paralysed, because they will go overboard on security," said Peter Harbison, an analyst at the Centre for Asia Pacific Aviation.

One industry expert dubbed the attack "the blackest day aviation has had," with other catastrophes, such as the 1988 Lockerbie bomb, paling in comparison.

While there is expected to be a dramatic decline in passengers to the US, American tourists are expected to cut back on their international holidays.

As seen during the Gulf War, US tourists are likely to be concerned about becoming targets of terrorists when traveling outside their home country.

Dr. Sam Jonah and his team at Ghana Airways have been dealt an unkind blow by events that took place 10 flying hours from the Kotoka International Airport, but even though The Accra Mail could not force a public statement out of him last Friday, his emergency meeting with staff of the airline revealed a grim determination to move forward regardless of the tragedy of September 11 2001.

Source: .