Title: The skies are opened
Both the domestic and sub-regional skies are well opened for aviation business but the challenge lies in recognising the massive potential impacts of air transportation on local economies in the sub-region, including Ghana.
By: Effah Amponsah
I scribbled this from seat 26A on a flight from Accra to Cotonou, the premier city of the West African state Benin, just beside my nation, Ghana. Around me were other colleague-journalists, marketing executives and other travelers. The look on their faces epitomised jitteriness, especially when the routine safety measures were announced by the flight attendants.
Accra and Cotonou is 350 kilometers apart and a road traveler will take not less than eight hours to reach the Benin capital, but here we were in the skies spending only 45 minutes approximately, and 20,000 feet above the ground to get to our destination. This was an inaugural international flight of one of the relatively new domestic airlines in Ghana. With my laptop on my lap I thought: “Ghana's domestic aviation sector is going somewhere”. Hitherto, the mention of air travel sent ordinary folks thinking that the affluent are it again, they have got some monies to throw into the air. These days it is no more a symbol of luxury and aggrandisement to fly from one city to the other in this part of the world.
Like mobile phones and personal computers, air transport is fast becoming a necessity for a lot of Ghanaians. The pertinent socio-economic benefits of air transport have bugged the ordinary African folk including the Ghanaian. Air travelers fly in the local skies for a myriad of reasons, ranging from as casual as “enjoying how it feels to fly in an airplane” to beating deadline to append a signature to kick-start a multi-million business enterprise. Generally speaking, the sector is seeing a steady, tremendous growth in terms of operations and affordability. No wonder it has been rewarded with confidence from the air-travelling public in Ghana. With four carriers flying in the local skies, albeit not at the same time, except on different routes, the local aviation industry is strongly gaining international recognition and reputation from aviation watchers and experts. The fast-improving state of this transport sub-sector is luring the monies of expats who are partnering with indigenes to invest in the industry; Starbow, Fly 540 and the incoming Africa World Airlines, being cases in point. Even though the industry is experiencing a golden age of business growth in investments and development, this transport sub-sector has not really been explored and exploited yet, in terms of its potential contributions to economic development for a nation like Ghana.
Few African states have paralleled the west in appreciating and exploiting the vital contributions of aviation to a nation's economic agenda. Kenya, Ethiopia and South Africa are some of the few African states which have in significant dimensions exploited the aviation sector to the optimum. Paul Steele, the Executive Director of Air Transport Action Group (ATAG) asserts that, “while not everyone on earth can afford to fly today, the benefits of air transport spread far beyond the people involved in the flight itself”. According to the International Air Transport Association (IATA), global economic growth is a key driver of growth in air traffic demand. However, while air traffic demand has increased as economies have grown, air transportation is factually a key cause and facilitator of economic growth for many economies globally.
Not only is the aviation industry a major industry in its own right, employing large numbers of highly skilled labour force, but more importantly it is an essential input into the rapidly growing global economy. Greater connections to the global air transport network has boosted the productivity and growth of economies by providing better access to markets, enhancing links within and between businesses and providing greater access to resources and to international capital markets.
Tony Tyler, the CEO for IATA noted recently that for many of Africa's governments, aviation is not the top priority. “Eliminating poverty, improving health, raising living standards, and generating jobs rank much higher. My message is not to shift priorities, but to ask governments to see aviation as an economic driver and develop policies to support that important role.”
The facts and figures are available to tell the story of aviation's colossal contribution to the development of economies. In 2011, over 2.8 billion passengers were carried by the world's airlines. The sector contributed $2.2 trillion of global GDP and $67.8 billion in Africa representing about three per cent of the world figure, including catalytic impacts. Worldwide, the amount contributed to the global economy by aviation jobs is roughly three and a half times higher than that contributed by other jobs. Aviation is indispensable for tourism, which is a major engine of economic growth, particularly in developing economies.
Globally, 51 per cent of international tourists travel by air. Over 56 million people are employed worldwide in aviation and related tourism. Of this, 8.36 million people work directly in the aviation industry and Africa represents 12 per cent of the total jobs. When Iceland's Eyjafjallajokull volcano erupted in 2010, a week-long disruption of air traffic in Europe caused 10 million passengers to be affected and cost the global economy $5 billion. Reports say passengers were not the only ones affected, parts of the automotive industry were forced to slow production as supply chains remained grounded and African economies lost up to $65 million in exports of time sensitive perishable goods. Obviously, aviation could play an even bigger role in facilitating Africa's growth and development. To achieve this, however, we need a team effort of government and industry focused on improving safety, adopting a coordinated policy approach and implementing global standards,” said Tony Tyler, IATA's Director General and CEO in a keynote address to open IATA's Aviation Days in Dakar, Senegal.
Oxford Economics forecast that aviation's direct contribution to GDP in Africa will increase by 5 percent per annum in real terms over the next 20 years helping to create an additional 66,000 jobs across the region by 2030. Passenger numbers in Africa are expected to expand from 67.7 million in 2010 to 150.3 million in 2030, with RPK growing at an average annual rate of 5.1 percent. Meanwhile, cargo volumes are projected to rise at a similar rate of 5.2 percent per annum.
“Africa has the greatest potential of any continent for aviation to contribute even more to its development. Supported by adequate infrastructure, the proper cost structure, and operating within a policy framework that values its contribution, aviation could play a much larger role in the African economy as a whole. Aviation connectivity is about people doing business, products moving to markets and new opportunities being discovered. With a few kilometers of runway even the most remote location can be connected to the global village. This has a huge and positive impact on development. And that is the best reason for governments across Africa to care about aviation and work together to ensure its safe, efficient and sustainable progress,” said Tyler.
It is quite evident then that the aviation industry is crucial to the growth of the global economy, hence, governments, including Ghana's must invest more in the sector and also encourage private participation in this sub-sector of the transport industry. Ghana's aviation industry, with an average growth-rate of 10 percent, is one of the fastest growing and most competitive in the West Africa sub-region, albeit Nigeria's highly competitive aviation industry and market. The Ghana regulator has encouraged private participation on the basis of local content and local participation policies. “There is great potential in the aviation sector in West Africa. This presents an opportunity for domestic carriers to explore the possibility of operating regional flights,” Air Commodore Kwame Mamphey (Rtd.), Director-General of the GCAA, said.
For now, air travelers are quite satisfied with the current state of air transport, that is, reliability, safety and affordability. Meanwhile industry operators are decrying the high cost of jet fuel currently on charge. In an interview with GB&F, the Co-Chief Executive Officer of Starbow Airlines, Dr. Brock Friesen said the cost of jet fuel in Ghana is relatively higher as compared with charges on the European and other African markets. According Dr. Friesen hike in charges surges the operational costs of operators, yet they manage to keep fares at a reasonable amount in order to stimulate demand from the market.
This means profit margins will reduce. Obviously such a trend, in the long term, would cost both operators and the aviation sector in general. Since operators tend to have slim profits, it stands to say they cannot invest to a larger extent in order to enhance growth of the sector. There is the need for serious consideration to review the prices of jet fuel, given Ghana's new status as an oil producing economy. It is a fact that reviewing jet fuel periodically, in conformity to globally trends would help reduce the operational costs of managing airplanes in Ghana.
There are many problems that hinder the growth of the industry and affect the expansion of operators' business. It is high time operators of domestic airlines presented a united front in order to present their grievances in a concerted fashion. Like in telecommunications where operators present their common interest through the Ghana Chamber of Telecommunications, it is imperative that operators of domestic airlines reach a consensus so that they can sing from the same song sheet on matters of common interest. It is apparent that such a move would galvanise operators towards a common vision, yet sustain a healthy competition among operators. Birds of the same feathers must fly together but in different directions.
Starbow boss expresses fuel concerns
The aviation industry is fast-gaining recognition in Ghana as the emerging most competitive industry in the economy. Currently, four operators are flying in the local skies, whilst a new entrant, Africa World Airlines, is yet to commence operations in Ghana, even though at the time of this write-up the first airplane was resting on a hanger a Kotoka International Airport. With increasing operators, competition is just a natural consequence, and inuring to the benefit of air travelers in Ghana and of course operators who do their homework well.
Currently, Aero Surveys Limited, operators of the Starbow airline is leading the league of players in the skies. Reports say, Starbow has stepped-up patronage of the domestic air travel by three times more than it met the industry at commencement of Starbow’s operations. In essence, air travel rates have surged, affordability is high, reliability is elevated and safety is more secured. The presence of other operators - Antrak Air, Citylink and Fly 540 has created a healthy competition that has resulted in current state of the industry.
Against this background, operators are concerned about certain pertinent issues regarding domestic aviation sector in the country. Paramount among them is the high cost of fuel in Ghana. In an interview, Dr. Brock Friesen, the Co-Chief Executive of Starbow told GB&F that fuel charges in Ghana is very high as compared to other western and neighboring countries.
“The price of jet fuel in Accra is about 50 per cent higher than what it is in London, Paris or Frankfurt. It’s the way the pricing is done in Ghana. There is only one refinery in Ghana, and it sells fuel for different uses at different prices that’s a major impediment for the airline industry”, he added. “Aviation fuel is not significantly different from what you will burn in a diesel engine or stove. It is a basic kerosene type of product,” he explained to GB&F, arguing that aviation fuel should not be sold at the current high prices.
Industry watchers say operators of airlines in order to swerve high fuel charges in the country, airlines travel or stopover in neighboring countries to refill before landing in Ghana. Although there are other problems bedeviling the domestic aviation industry, operators have weathered the storms and operated with optimal efficiency. A review of the fuel charges is expected to cause operators to further review downwardly, their air fares.
Source: http://www.ghanabizmedia.com/ghanabizmedia/september-2012-aviation/785-the-skies-are-opened.html
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