Comment: a new ‘Ghana Airways’ - To do or not to do

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

The erstwhile Ghana Airways was founded in 1958 and for decades was the national airline with the Kotoka International Airport (KIA) as it 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, the airline was liquidated.


Government is also putting to bed outstanding nagging issues with the last national carrier, Ghana International Airlines (GIA), which suspended operations in May 2010, before proceeding to set up a new one.


For the past two years, government has taken the initiative to seek support from the private sector in the establishment of a new national carrier.


Mr. Twumasi Ankrah Selby, Chief Director of the Transport Ministry, has said that government wants to set up a national airline to support Ghana’s vision of becoming the sub-region’s aviation hub.


The proposed new national carrier, according to Mr. Selby, will be on a public-private partnership basis to make it viable and efficient.

“This time around, government wants to involve the private sector in setting up the new airline. Government only needs carried interest, but the private sector is supposed to take majority investment in the management. The process is for government to go on tender, open it up for interested stakeholders to come in, then government can make a choice,” he said.


The Minister of Transport, Dzifa Ativor, also told the media earlier in the year that government was evaluating some possibilities to set up a new airline under a public-private partnership, in an attempt to tap into the prospects of the aviation industry.


Alhaji Banda’s opposition


The founder and Chairman of Antrak Group, Alhaji Asuma Banda, last week indicated his displeasure at attempts by government to re-establish a new national carrier— a move he sees as a conduit to waste public funds.


“If the government goes ahead to establish a new airline, I will challenge them in court. We have no money to throw away. It won’t work,” he said.

According to Alhaji Banda, mismanagement of the erstwhile national airlines was the principal reason for their collapse.


Alhaji Banda’s threat appears to be morally motivated and with genuine concern for the ordinary Ghanaian. The aviation industry, with margins of between 1-3 percent, is not a viable business for government to venture in when there are numerous problems to be solved which directly affect the lives of ordinary Ghanaians.


Indeed, Finance Minister Seth Terkper admits that the public wage bill takes a chunk of government’s revenue, leaving so little for other important commitments.


“Compensation to public sector employees alone continues to take a very significant percentage of tax revenue (73.9 percent as at end-August), resulting in less revenue being available for other important expenditure such as goods and services and capital,” he said.


Government, he added, lowered expenditure on goods and services; spending GH¢463.2 million in the first eight months of the year against a budget of GH¢926.3 million. Capital expenditure was slashed by almost GH¢0.5billion, against a target of GH¢3.2billion.

If that is the case, some have argued, why attempt to spend money in a business venture that will not yield returns for the first couple of years? The health and education sectors are two areas that have seen little investment in recent years. Why not invest heavily there?


Benefits of a national airline


Establishing a national carrier is not out of place given the macro-economic stability and the economic growth experienced in recent years.


However, Mr. Keith Williams, Group Chief Executive of British Airways, believes that any such initiative should be privately managed and should take into account other carriers servicing popular routes in Europe and Asia from Accra -- and come out with a business model that will make it profitable.


Mr. Michael Yared, Area Manager, Ghana, of Ethiopian Airlines, said: “It is significant for the country to have a national carrier. It will have a big impact on the economy. Ghana’s economy is growing and a national carrier will boost that growth. Air traffic is growing; why should Ghana lose out on it?”

Others believe that it is prudent for any national carrier to focus on servicing routes within the sub-region and other African routes where there is a growing market, and then grow from there rather than join other operators servicing popular routes in Europe from the onset.


Choosing a successful model


There are some successful models in the running of national carriers. Majority of the shares in some successful national carriers are held by citizens of the home country or foreign investors; there is no government stake whatsoever. They are also privately managed with no government interference whatsoever.


Other successful national carriers in Africa are partly owned by government with private and institutional investors holding the majority shares. For instance, Kenya Airways has an ownership structure such that individual Kenyan shareholders hold 30.94%; KLM - 26%; Government - 23%; Kenyan institutional investors - 14.2%; foreign institutional investors - 4.47%; and individual foreign investors - 1.39%.


While the idea may by laudable—it will put Ghana again on the map—the right approach and shrewd pragmatism must be employed in any decision going forward.