Executive Director of the Institute of Statistical, Social, and Economic Research (ISSER), Professor Peter Quartey, has attributed Ghana's high domestic airfares to a combination of factors, including taxes, aviation fuel costs, loans, and the relatively small size of the local market. His comments come amid growing concerns over the high cost of air travel in Ghana, which can make flying less accessible to domestic passengers.
According to Prof Quartey, Ghana's smaller aviation market makes it difficult for airlines to benefit from economies of scale available in larger markets, such as Nigeria. The population of Nigeria is larger, and with more aircraft and competition, airlines are likely to charge lower fares. In contrast, Ghana's market is not as huge, making it challenging for airlines to reduce costs and pass the benefits to consumers.
Prof Quartey also cited lower income levels as another factor limiting demand for domestic air travel in Ghana. Most people in the country prefer to use road transport, such as trotro or buses, rather than flying. This limited demand makes it difficult for airlines to reduce fares and increase accessibility. Additionally, the age and experience of airlines operating in other markets, such as Ethiopian Airlines and Kenya Airways, also contribute to the high cost of air travel in Ghana.
The economist further pointed to Ghana's tax environment as a contributing factor to the high cost of air travel. He noted that the country's tax rate, including Value-Added Tax (VAT), is higher than the average tax rate in many African countries. This higher tax burden is passed on to consumers, increasing the cost of air travel. Prof Quartey emphasized that the tax environment needs to be reviewed to make the industry more competitive.
Prof Quartey identified the cost of credit as another pressure on airlines in Ghana. Many airlines have borrowed funds to operate and need to service their loans, which adds to their operational costs. The high cost of credit in Ghana makes it challenging for airlines to reduce fares and increase accessibility. Furthermore, aviation fuel accounts for a significant share of airline operating costs, and Ghana's fuel costs are higher compared to other countries.
To address the high cost of air travel, Prof Quartey suggested that the focus should now be on developing Ghana's aviation market to attract more players. He emphasized that greater investment would come when the market becomes sufficiently attractive, and the environment is good for investors. Once the market is developed, and it is profitable, every investor and businessman would like to invest in the industry.
In conclusion, Prof Quartey's analysis highlights the need for a comprehensive approach to address the high cost of air travel in Ghana. The factors contributing to high airfares, including taxes, aviation fuel costs, loans, and the small market size, need to be addressed to make air travel more accessible to domestic passengers. By developing the aviation market and reviewing the tax environment, Ghana can increase accessibility and reduce the cost of air travel.
Key points
- High taxes, including VAT, contribute to the high cost of air travel in Ghana.
- The small size of Ghana's aviation market makes it difficult for airlines to benefit from economies of scale.
- Lower income levels and limited demand for domestic air travel also contribute to high airfares in Ghana.
