Columnist: Adjekum, Daniel Kwasi
Monday, 25 February 2013
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.
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
minimized, 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, undercutting 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.
Yamoussoukro Accord.
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 License
(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 liberalization 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 favorable 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
neighbors 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.
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