Domestic airfares in Ghana are rising because of high taxes, expensive aviation fuel, loan repayments, and the small size of the local market, according to economist Professor Peter Quartey. Speaking on Joy News’ PM Express Business Edition on Thursday, Prof Quartey said the combination of these factors makes air travel less affordable for many Ghanaians.
“The cost of doing business is high not just in aviation but across the board,” he said. “If you look at our hotels, you’ll see they’re expensive. If you look at other things, rent, etc., we tend to be quite expensive.”
He contrasted Ghana’s aviation market with Nigeria’s, where a larger population and more intense competition among airlines help keep prices down. “Our market is not as huge as you would find in Nigeria,” he said. “In Nigeria, there’s a lot of heavy traffic. The population is larger, and therefore, if you operate within that space, and you have more aircraft, you have competition; you are likely to charge lower.”
Prof Quartey also pointed out that lower income levels in Ghana limit the demand for domestic flights, pushing many people to choose road transport like trotro and buses instead of flying.
He said Ghanaian airlines also face challenges from the tax environment. “From the numbers you showed, it looks like a 20%, if you add them up straight line, a 20% tax, whereas in many African countries the average tax, VAT, is less than 15%,” he said. “So we are taxing, overtaxing the industry. And certainly, as a business person, they will pass it on to the consumer, pass it on to us to pay.”
Loan repayments add another layer of pressure on airlines’ finances. “I know some of these airlines have borrowed, I mean they have loans that they are servicing, and they have to pay. They have to cover their costs and pay for the loans,” Prof Quartey explained.
Aviation fuel accounts for about 30% of airline operating costs, he said. “If our fuel cost is higher compared to other countries, then certainly the cost will be higher, higher.”
He also noted the experience gap between Ghanaian airlines and some of their African counterparts. “You find Ethiopian Airlines, for instance, has been in this business for a very long time; Kenya Airways has been in business for a very long time,” he said. This long experience allows airlines in those countries to operate more efficiently and potentially offer lower fares.
Prof Quartey called for a focus on developing Ghana’s aviation industry to attract more players and investment. “What we should be doing going forward is to develop the industry,” he said. “Once there is the market, once the environment is good, once it’s profitable, every investor, businessman would like to invest in a profitable business.”
He said the current small market size forces airlines to charge enough to cover their costs rather than compete on price. “If the market is not as huge, if we haven’t developed the market and it’s so small, and then the very few who ply that route will be charging enough to cover their cost of operations.”
Ghana’s domestic air travel remains out of reach for many because of these combined factors. Prof Quartey’s analysis suggests that addressing taxes, fuel costs, and market size may be essential steps before fares can come down.
According to Joy Online.
