Feature Article of Monday, 25 February 2013
Columnist: Adjekum, Daniel Kwasi
The recent revelation by the Minister-Designate for the Ministry of Transport, Dzifa Ativor, at her vetting before parliament, that there are plans to establish a national airline as a result of Ghana’s growing economy brings to fore another attempt by governments to wade into “shark infested waters” of the aviation industry. Ghana Airways, the only national carrier as at 2002, was stopped from operation after it was engulfed with huge debt due to poor management and other related factors. Ghana International Airlines (GIA), which was formed out of the defunct Ghana Airways, was supposed to revive the once glorious national airline and place it on the world map of aviation as the star of Africa in the air.GIA, unfortunately was haunted by the ghost of Ghana Airways and could not survive the malady that sent it’s predecessor into the grave of insolvency..The operations of both defunct airlines faced several challenges, including bad management practices, massive governmental interference and open handed corruption. Will the proposed new carrier be the proverbial “phoenix rising out of the ashes?
The new proponents of the national carrier are making their case through a Public-Private Partnership (PPP) initiative. In an evolving and very dynamic world of aviation, the challenges faced by airlines is one that requires a lot of bold and prudent strategic management focused on cost –cutting and efficiency to achieve maximum gains. In an industry where profits are a delicacy and losses tend to be the order of the day, every ounce of management acumen and intellect is dedicated to finding areas where losses can be minimised, without compromising regulatory requirements and safety standards. The core aim of any private sector investor is to make profit and would do an analytical assessment of the return on investment (ROI), before committing to any venture. Aviation business itself is very capital intensive and airline products like seats are cannot be filled or exchanged once an aircraft is airborne. Unlike products that are on a shelf of a supermarket or on display at a dealership, the entire product is lumped together as one composite unit in the form of seats and cargo-hold in an aircraft, and if they are not filled for a particular flight, the revenue to be accrued from those seats and cargo are lost. Revenue generation in airlines therefore is both a science and an art, which requires a lot of understanding of the economics of yield management and traffic/load factor.
Competition from Established Global Carriers
Local carriers like a new Ghana Airways will be flexing muscles and will have to withstand growing competitive pressure from bigger international airlines like Qatar Airways, Turkish Airlines and Air France, which are encroaching on the African continent with big planes and low fares. In 2012 alone, Qatar added five African destinations to its network, while Air France created a new subsidiary airline in Côte d'Ivoire to cement its near-monopoly throughout Francophone Africa. These global behemoths enjoy significant economies of scale: they are big enough to hedge effectively against escalating fuel costs. They also have the goodwill to secure enormous discounts from aircraft manufacturers when bulk-buying new planes. Last January, nine African airlines responded by pooling their fuel purchasing in an effort to secure lower prices, but more dramatic initiatives are required if our proposed national carrier, which might not boast of more than a dozen fleet, is to compete on equal terms with groups like Air France which, together with partner KLM, operates 369 (Enonomist,2012).
Consolidations and Mergers
In a world of consolidations and mergers, which has worked in Europe, there are the Lufthansa Group, Air France-KLM and IAG (the holding company of British Airways and Iberia) dominance. This consolidations and mergers create great synergies for these giants and their tentacles have a detrimental suffocating effect on some smaller carriers. They effectively have a big impact on fare pricing and this leads to some smaller airlines, undercuting each other and driving down fares. In Africa, though, competition is scarce, and on many routes there is only one operator, creating another national airline, with state resources and state management will not be the most prudent business venture. Already Africa has on a per-kilometre basis, are the highest air fares in the world (Economist, 2012). The idea of mergers and consolidation is still at an infant stage and would require a lot of political and economic will to ensure trust and equity among the parties in any merger. Are we ready to consolidate the new airline or better still merge with other airlines? These are some of the issues that we have to consider.
The Yamoussoukro accord of 1999,had governments from 44 African countries sign a treaty to work towards a so-called “open sky”, under which an airline based in any African country would be allowed to operate to, from or between any combination of cities in any other African country. Thirteen years later, many governments, particularly those in eastern and southern Africa, are still dragging their heels, seeking to shield their own national carriers from competitors based in adjacent countries. The subsequent delay has been detrimental to the growth of airlines in Africa. Most African airlines are dependent predominantly on local patronage, which is limited. Airlines in smaller African countries have either collapsed or consumed vast amounts of government cash that could have been better spent on more urgent projects and infrastructure improvement.
Air Nigeria, which was supposed to model of efficiency and safety in airline management in Africa, became complacent and allowed costs to spiral as fares soared. Sheltered from competition, they have had little incentive to invest in, for instance, modern aircraft, secure ticket distribution or brand development. Worse, protectionism has constrained the growth of their route networks and kept them artificially small. So when giant European and Gulf competitors move in usually with frequent scheduling and brand new aircraft, even big African players like Kenya Airways, South Africa Airways and Ethiopia feel the heat of the competition. Some proponents have asserted that Open skies would transform African aviation for the better. Start-up airlines would emerge to challenge complacent incumbents. The launch of Fastjet, a Tanzanian low-cost carrier, has already prompted Kenya Airways to plan its own low-cost subsidiary, JamboJet (Economist, 2012). A proliferation of operators would kick-start a process of creative destruction from which only the fittest and most competitive airlines would emerge. It would be the survivors of this cut-throat process of sharks in blood infested water.
Strategic Aviation Policy
Another area that is of much concern is in the area of a comprehensive aviation policy for Ghana. What is our overall strategic policy on aviation for the next ten to twenty years? Do we have a laid out plan to develop the needed infrastructure and human resources required to implement these policies? In recent times, we have seen the proliferation of locally owned start-up airlines in Ghana, but a lot of their growth has been stunted by both political and economic challenges. Start-up airlines require huge capitals and normally because of the volatility of the aviation industry and it’s penchant for failures, most financial institutions and banks would clearly stay away from those “waters”. It requires a colossal amount of money and resources to get the needed aircraft with all the operational, administrative and technical support to even start the process of application for an air carrier Licence (ACL) and air operators certificate (AOC) from the Ghana Civil Aviation Authority, which is mandated to ensure regulatory oversight of civil aviation in Ghana.Some experts have called for full liberalisation of the aviation sector in Ghana. They have called on governments to prop up weak local operators, a policy already being implemented in Nigeria, where authorities hope to subsidies aircraft purchases as part of an ill-advised lending scheme. I strongly have this nagging fear that a total free-for-all would leave indigenous carriers at the mercy of the European and Gulf giants. The irony is that even in Europe, aviation rules dictate that airlines must be majority-owned by Europeans. Strict ownership controls in Ghana would prevent foreign groups from establishing their own Ghanaian subsidiaries and exporting all the profits to the detriment of the indigenes.
Human Resources and Training
With the projected boom for aviation in Ghana, due to an economy the has been projected to grow progressively and the much touted infusion of capital from the oil production, there is the need to ensure that well trained and competent Human Resources are available to manage our aviation infrastructure. Presently in Ghana, there are only few aviation related courses in the business and technology at our educational institutions. There is a fledgling aerospace engineering course at the Kwame Nkrumah University of Science and Technology. The course should be tailored to be real world and churn out graduates with a practical and contemporary outlook on the industry. I find it surprising that the University of Ghana Business School has not fashioned out courses in aviation management and business administration with majors in aviation as done in places like the USA and Europe. Our polytechnics which are supposed to bridge the manpower gap at the intermediate level also does not have courses in aviation and it is only the Ghana Airforce,that has a training facility to churn out aircraft technicians and mechanics. Pilot training has been a “foreign affair” in Ghana as prospective pilots have to spend between 80,000 -120,000 US dollars to train as commercial pilots, with the requisite certifications and qualifications to be even considered for entry level positions in the airlines. I know there are some local training facilities like CTK Aviation which aims at giving prospective pilots at least their private pilot certification before they seek further training outside Ghana. The sorry state of the Afienya Flying facility and aircraft of the defunct Sankofa Aero Club which was supposed to spearhead pilot training in Ghana is glaring for all to see. The great exodus of very qualified and competent Ghanaian pilots and aviation professionals all over the world bears testimony of the enormity of the problem.
In the midst of all these plethora of issues, there is hope and the following recommendations will hopefully gear up our aviation industry.
1. I am one of the opponents of any form of government participation in the airline business, and I still stand by it. I think rather the government should provide the needed policy framework, which will create a conducive environment for partnership between private Ghanaians and foreign entities to invest in the sector. Government should only be a regulator, to ensure that there is an even playing field and the costumer gets excellent aviation services.
2. Government can also free up the Ghana Airport Company Limited and Ghana Civil Aviation Authority to have some high level of autonomy to generate funds, which will help to maintain and improve existing aviation infrastructure and services.
3. In the more capital intensive areas of airport infrastructure and aviation ground services and handling, the concept of build operate transfer ( BOT) can be considered on fair and favourable terms, which will ensure equitable returns for both the investors and the government.
4. There should be a comprehensive aviation education policy to streamline all human resource training and infrastructure. This will ensure that as a nation, we would have the needed manpower to manage our aviation assets. The polytechnics like Accra and Takoradi Polytechnic can have courses in aviation maintenance technology, leading to certification as aircraft maintenance technicians and technologist. The KNUST aerospace engineering curricula should be streamlined to reflect more current and practical trends in the world of aerospace.
5. The University of Ghana can have a maiden aviation department under the School of Business, which will churn out Business graduates with majors in aviation and at least a private pilot certification issued by the GCAA.The University can liaise with the Ghana Air force to convert the Afienya Flying Club into its Flight Operations Centre. This business model will see business undergraduates and graduates who will have both operational and technical knowledge in aviation. It will also provide the needed employment for faculty of aviation lecturers, flight instructors, dispatch, maintenance personnel and air traffic controllers. Eventually Ghana can be the torch bearer in aviation training, by creating the Regional Aviation University (RAU) modelled after the Regional Maritime University at Nungua Ghana. This University will train aviation and aerospace professionals from West Africa and eventually Africa and world wide.
6. We need to ensure that the frame work for aviation ensures a balance between safety regulation and economic regulation. The establishment of a separate aviation safety board ( ASB),which will be tasked with aviation safety/accident investigations and research into operational improvement and enhancement will ensure conformity with International Civil Aviation Organization ( ICAO) requirement ( Annex 13) for an independent accident investigation body. Presently the Transport Ministry has a loose section that is hastily assembled to investigate aviation accidents. Nigeria our neighbours are ahead of us with the establishment of the Aircraft Accidents Investigation Bureau (AAIB). I will propose a Ghana Aviation Safety Board which will take a leading role in accident/incident investigations and will have the mandate and powers to make recommendations for improvements to aviation safety. It will also spearhead research into aviation safety and serve as a think-tank to advise the Ministry of Transport on the safety implications and ramifications of any aviation related project in Ghana.
Over all the future of aviation in Ghana is bright and with the needed political will, financial commitment and right policy frame work, backed by resourced human capacity, we shall earn our spot as the aviation gateway of West Africa and eventually the destination and hub for many airlines.
Daniel Kwasi Adjekum is a retired Ghana Air force Pilot/Aviation Safety Officer, former airline pilot and post –graduate student in Aviation at the University Of North Dakota School Of Aerospace. Grand Forks. North Dakota .USA. [email protected]