Aviation: Operators attribute airlines failures in West Africa to lack of protection, multiple taxes, others
Airline Operators in West Africa have identified lack of protection, multiple airport taxes, lack of good corporate governance among others as some of reasons airlines fail in West Africa.
The operators who gathered in Ghana at the recently concluded Accra Weizo organised by the publishers of atq.com and organisers of Akwaaba African Travel Market in Lagos also identified the inability of airlines to grow its customers numbers to a sustainable level as another factor responsible for failure of airlines in Africa.
The operators which include Aero Contractors, Air Peace, Africa World Airline, AWA, Ethiopian Airlines, Smile Airlines and other stakeholders like the Ghana’s Minister of Aviation, Skyway Aviation Handling Company Limited, SAHCOL, and others stressed the need for urgent steps to be taken to reposition the aviation industry in the region so that the airlines can survive and become profitable.
In her opening remarks at the expo, the Ghanaian Aviation Minister, Madam Cecilia Abena Dapaah who was represented at the occasion by the chief treasury officer of the ministry, Mrs Evelyn Ama Lartey stated that It is evident from research conducted by African Development Bank in 16 ECOWAS countries that Airport fees, tax and charges is on the high in the sub-region compared to other markets.
She observed that this development which has been identified as a challenge to Air travel in the sub region, is impacting greatly on the cost of air travel, ease of doing business and movement of persons.
The Minister emphasised that: “It is therefore appropriate for us in the sub region to look at the airport charges and make conscientious effort to create synergy and allow private capitals in order to develop aviation infrastructure. The cost of travel within the sub region within member states must be relatively lower, compared to other markets. This will relatively encourage West African to travel within the sub region, we therefore has an obligation as stakeholders in the industry to continuously keep in touch for us to fully benefit from the opportunities in the sector.”
Speaking also, the managing director of Aero Contractors, Captain Ado Sanusi emphasised the need for individual countries to protect their airlines, stressing that lack of protection also contributes to factor of failing.
He maintained that: “If individual countries do not protect their airlines, that also contribute to factor of failing, because aviation is international, if you look at all these big carriers in Europe, America and others were protected by the state. British Airways, KLM, Air France and if I go to America, TWA, American Airlines, US Airways were once protected by their states to grow, but what we have failed to do in West and Central Africa is to protect our airlines for them to grow and when we assume, the states airlines are matured, the state will now say okay you can compete”.
Captain Ado noted that the airlines the carriers in West and Central Africa are competing with have been in existence for 100 years, 70 years and more.
He said the situation is like allowing infants to go and race with people that have been running since, adding that definitely they are going to fail.
He said: “My take is that there are lots of factors that contribute to the failure of airlines in the aviation industry in West Africa. One of the major factors is the lack of protection from the state, states must protect the airlines for them to grow into maturity before they allow them to compete with the legacy carriers. If you look at Arik Air, off course it was competing with Emirates, Emirates is protected by its own state, it was competing with British Airways, British Airways is in a matured state. Now come down to Africa, look at Ethiopian Airlines, why is it that ET is a success story in Africa because the state has agreed to protect and allow it to grow and compete with other international carrier.
“What you have to understand is that these airline are competing with airlines that have been in existence for 100 years, 70 years and you are allowing an infant to go and race with people that have been running since, definitely,they are going to fail”.
In his remarks, the chief executive officer of Ghana based Smile Airline, Mr. Alex Nwuba observed that because the airlines do not grow their customers numbers to a sustainable level, they are bound to fail.
He stated that the biggest challenge of the industry is the taxes.
According to him, “when you look at your tickets, they will give you a very nice base fares but when you add the taxes and surcharges, the fares become three times high and that is of interest to you as developers in the industry. When you look at the statistics, there are more people travelling by bus than by air, so the tourists opportunity still exist, but the airlines don’t take advantage of it.
” I am happy that the representative of of the Minister acknowledge the facts that they understand some of the challenges which are very high airport taxes, very high surcharges, fuel surcharges and all kinds of things that are tagged on to the fare to make them high, so naturally, people will rather drive than fly and that is the baseline for one of the reason we are not successful”.
He also identified another big challenge as the management or owners of the airlines.
Nwuba pointed out that good corporate governance is a very key element of that because corporate governance issue is one of the major reasons airlines also fail.
According to him: “Our airlines are owned by individuals, so it is in Ghana so it in Nigeria which is a good thing, but when you run an airline that is quite sensitive, corporate governance become a very key element of that. So corporate governance issue is one of the major reasons airlines fail, For people that run airlines like me, the failure of most airlines is because of the owners of the airlines. We believe that when we own an airline that makes a million dollars, we are entitled to take $800,000 as our personal gains and the rest to keep the airline running”.
Nwuba continued that: “Like I came to Ghana to start an airline, but i didn’t start, after spending a few million dollars on the process, we suspended the process, why because the government said it want to start a national airline, great idea, at the same time, Nigeria said it want to start a national carrier, so why Capt. Ado is striving to revive Aero and put it on sound footing, AWA is building it’s regional franchise, the government intention is to start an airline.
Airlines function on Bilateral arrangements between countries, under that arrangement, British Airways says two Airlines from Britain will fly to Ghana, so if government want to start an airline, their airline will definitely be one of those that will fly to the UK, which means AWA’s long term growth strategy is truncated and my plan to enter this market will become a wait and see how far the government can achieve because you cannot compete with the government.”
He disclosed that RwandAir celebrated as being successful is subsidised by the government of Rwanda to the tune of $50million a year, while in the case of South Africa, their government gave them $675 million last year and another $400 million this year.
In his words: “As an advocate, we must think of developing a domestic private airlines with good governance principles in place and then the government can play in that role, if the taxes are affordable to grow the sector.”
Contributing to the topic on why airlines fail in West Africa, Richard Kyereh of AWA said it is imperative to cut down on cost and put the right equipment on the route.
Kyereh stressed the need for airlines to build capacity and to stop the price war among themselves on the route so as to survive.
He called for government assistance to reduce the cost of visa on arrival because is too high and also impacting on the cost of travel.
Kyereh advised the regulatory authorities in the region to harmonise all the charges in different countries in West Africa so that the charges will be similar and affordable.
On his part, the Vice chairman of SAHCOL, Chike Ogeah said airline business is a complex one because when an airline is on air, it is paying money and when it is on ground, it is paying hotels bills for crew, food, fuel and others.
While observing that the industry is over taxed, Ogeah stressed the need to match aircraft type on the route to make it more profitable and for the authorities to review the taxes and waive some of them for the airlines to survive.