It is not obligatory for an elected government to consult ‘industry experts’ when and how it plans to invest State resources. But wouldn’t it save the taxpayer’s money to do so? I don’t know anybody who has had experience in the domestic aviation industry who was consulted BEFORE the Ho airport was built.
Once I got to know the project was going ahead, I did several revenue analysis and route scenarios, and struggled to see a domestic airline being able to establish a profitable scheduled service on that route.
When one airline announced sometime ago it was going to commence services to Ho, I thought the decision was more sentimental than commercial.
Now let me give you a few challenges for any airline that would operate a scheduled service to Ho:
- Cost vs Fare. It’s a short flight distance from Accra, but that doesn’t mean the airline won’t incur certain fixed and variable costs for each flight operated. Once the aircraft takes off, you need a certain load factor (a certain number of bums on the seats) at a certain average fare to break even and then hopefully to make a profit. Which brings me to the next factor.
- Distance vs Passengers on the route. Ho is not that far from Accra. If the road is good, it takes just about 2 hours or less to drive to or from each city. Given how much an airline would have to charge to break even per flight rotation, how many passengers are likely to be able to afford to travel by air compared to road transportation? And if the airline can’t get enough passengers, why would it take the risk?
- Political vs Economic considerations. It’d be interesting to read the Cabinet deliberations that decided to go ahead with the Ho Airport in order to understand what economic considerations went into the decision. Nevertheless, I have posted previously on Facebook that Ho and Cape Coast don’t actually need expensive, 2-km-runway airports. All they need is a well-equipped and maintained airstrip that can improve tourism and aid in medivacs. The optics of an airport in a region looks great politically. But the economic cost will always come back to bite if not seriously considered ab initio.
In determining how many air passengers you’re likely to attract to a particular aviation route, you have to consider the alternative means of transportation and what incentive therefore there would be for passengers to travel by air or the other alternatives. I drove to Ho many times, especially between 1997 and 1999. Who are the target passengers of the Ho airport? Are they middle-class people who own private cars who can drive to each city? Are they traders going to Madina and Makola markets? Are they politicians and business people travelling for weekends? How many of each category do you expect to travel each day by air transportation? And if not each day, are there particular days on which more people travel between Accra and Ho?
I get President Mahama’s point about increasing economic activity in the region that will in turn attract people in industry as well as tourists.
But aviation is about cost and revenue, and revenue is about passenger throughput and average fare passengers are willing to pay. And passengers will always compare the fare they pay versus what alternatives they have, the safety and convenience they need when they reach their destination, among others.
For an airline to operate daily or 3x weekly flight to a destination, they need to be sure the passenger numbers would be there and passengers would be able and willing to pay a certain average fare. Alternatively, the airline needs a company to guarantee a certain number of seats. I managed a similar arrangement at Citylink and Antrak on the Accra-Sunyani route. The only reason we could operate that route is because Newmont, with its Ahafo mines, secured a certain number of seats per flight. Look, airline operations are expensive and someone has got to pay for the aircraft to take off and land at the Ho airport. The financials have to be persuasive, otherwise you can burn money so fast before you know it.
The author; Kwaku Antwi-Boasiako.
