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Opinions of Monday, 20 February 2017

Columnist: Adobor, Henry

Why revamping Ghana Airways is a bad idea

By Henry Adobor, PhD

In my opinion, revamping a new national airline is a bad idea. There seems to be little to no reason for optimism that a new national carrier can compete, be profitable and survive in the long run.

I have lost count of how many times we have tried to raise a new national carrier after the demise of Ghana Airways as we knew it. Ghana Airways collapsed for a reason. That airline collapsed at a time when there were far fewer airlines flying into Ghana. What makes anyone think that a new airline can compete and survive now that there are five times more airlines plying the Ghana route? I cannot think of any. More importantly, anyone who understands the economics of the airline industry would tell you this question should be answered in the negative.

The airline industry is a red ocean teaming with sharks. It is one of the most competitive and least profitable industries in the world. Very few airlines make decent returns on assets and investment. Sometimes just flying alone is considered a success. Airlines that succeed often have to operate with brutal efficiency on thin margins. There are airlines in the US today that are considering charging for the overhead bins! Even Singapore Air, an airline with an excellent reputation, operates with extreme efficiency and perhaps modest profits. Back to Ghana, a casual look at the industry shows growing competition. There are no fewer than 5 to 6? major international carriers flying into Accra these days. I suspect Virgin pulled out, in part, because of competition. Some of the international carriers ply the regional routes as well and so only the domestic market enjoys exclusivity to local operators. I know nothing about the profitability of the domestic operators, but I would not be surprised if they are just breaking even.

I agree that competition alone is not enough to deter a potentially powerful and well-oiled new entrant. A new entrant into a highly competitive marketplace must have resources, capabilities and competences existing firms may lack, or if they have them, one the new player can match. I cannot see any resources a new Ghana Airways will bring to the market in those respects. A new national airline may bring enthusiasm, and national pride, but not much else. Ghana is not Qatar or UAE that can afford to purchase 20-30 brand new Boeing Dreamliner planes at a go. You probably will have to lease a plane to start with. Imagine playing in the premier league with borrowed boots. It won’t be fair competition.

The past may be a window to the future. I am not saying we should let the past cripple our aspirations. However, at times the past can guide and inform our choices. Perhaps the PricewaterhouseCoopers feasibility study the Minister of Aviation referred to include a retrospective review of why Ghana Airways failed in the first place. I hope it did and if I am to speculate on the results of that review, it would probably show that the airline was either mismanaged or could not compete. Either of these two explanations makes for cold comfort. Of course, I suspect the failure was due more to the former rather than the later. Most people who flew the old airline regularly know how it was run. Arbitrary actions by crew and agents, a careless attitude towards customer service and the tendency to treat the airline as a private property the same way we treat most of our state properties. Sadly, the opposite of these attitudes are those a good airline should have.

Customer service and operational efficiency are perhaps the two most important competences required to run a successful airline. Airlines are in the business of selling service. Singapore Airlines has a great reputation simply because its service is outstanding and passengers are not taken for granted; they are wooed, appreciated and valued. With Ghana Airways, passengers were a burden, a sort of necessary evil that had to be dealt with to make revenue. I have little confidence that the old poor work ethic and attitudes would change. Maybe when we work for foreign airlines or private airlines, we may demonstrate those desirable work behaviors. Once the name Ghana is slapped in front of that airline, I am afraid those same negative attitudes would boil to the surface again. You can disagree with me but that is my opinion based not only on my own experience, but also on those of people I have spoken to.

It’s true a few African National Carriers are doing well. But those are the exceptions rather than the rule. Ethiopian Air comes to mind as a successful national carrier, but most others, including South African and Kenya Airlines, are struggling. That must tell us something. This is not an easy industry to be in. Airlines that are profitable have to work very hard at what they do. The intensity of the competition they face is no joke.

The Minister of Aviation at her vetting articulated some of her reasons for believing a new national carrier was a good idea. She mentioned she had spoken to consultants who say it can be done and cites the PricewaterhouseCoopers study. She noted that about 1.8 million Ghanaians fly annually, 18 million Africans and 1.5 billion people travelling worldwide and so we can’t go wrong. Great statistics, but because there is market does not necessarily mean that we have what it takes to take even a sliver of that huge market. Focusing on the demand side alone is incomplete. It is the value proposition that one brings that counts.

Besides massaging our national pride, I do not think a new airline adds much. I dare say that the average Ghanaian traveler today is far more sophisticated than we think and national pride alone is unlikely to make them fly with a poorly managed national carrier. I think there are potentially more important things we can do to increase our national pride. If we have good facilities at our airports, run them well everyone would be proud. I am sure there is a lot the Minister can do and will do. I just hope that she can take a step back on this idea. My hope is she comes to the conclusion that not having a national carrier is not the worst thing that would happen to Ghana and that she can still have (and we want her to have) a successful tenure, even if it does not include the birth of a national airline.

Airport revenue. The return on investment into upgrading our airport facilities such as building and upgrading our runways and other facilities is much more attractive than being in haulage. I suggest we concentrate on investing in those resources; upgrading our airport facilities, building new and wider runways, facilities for embarkation and disembarkation.

So what if we have an alliance with an established airline? There are indeed advantages to forming an alliance with established carriers. That strategy comes with well-known advantages and disadvantages and there is no need to list them here. However, being a junior partner in any alliance is not necessarily the best position to be in. Being a new airline makes your position weaker still. But the most important reason why I will caution against forming an alliance with some foreign global players now is the nature of the global geo-political dynamics that the world faces today. I avoid elaborating on this issue now for lack of space. My point is if you think you cannot do it alone, why bother?

And Finally. The Honorable Minister is clearly passionate about this airline thing. As she made clear, “there is a fire burning in her” and she wants to “give birth to an airline by His Grace… and stop people from eating our lunch.” I have no doubt the Minister means well. But there is a difference between having an airline and running a profitable and successful one. This is one time I do not mind if people eat our lunch. There is a place for the passions and national pride. But reason and economics have their place too. I hope, in this case, that reason trumps passion and patriotism.

Writer's e-mail:hadobor@gmail.com