A recent social media post highlighted the high cost of domestic air travel in Ghana, sparking widespread concern among consumers. The post called for government intervention to address the issue. Many Ghanaians now see domestic flying as beyond their reach. The high cost of domestic airfares is part of a broader cost problem in Ghana, often referred to as "the Ghanaian pricing culture." This culture affects various sectors, including hotel rooms, residential accommodation, office rent, and car rentals.
The structure of the domestic airline market in Ghana has undergone significant changes in recent years. In 2012, there were four players in the market: Starbow, Africa World Airlines (AWA), Citylink, and Fly540. However, the market consolidated, and by 2017, only one player remained. The entry of PassionAir in 2018 increased competition, but AWA and PassionAir are currently the two main scheduled domestic operators. This change in market structure has contributed to higher airfares.
A recent fare survey was conducted to compare domestic airfares in Ghana with those in other countries. The survey found that Ghana's average lowest return fare was US$313.06, while the average highest return fare was US$450.48. In comparison, the average lowest and highest return fares in Nigeria, South Africa, Kenya, and India were US$181.50 and US$227.00, respectively. Ghana's average lowest fare was about 72% higher than the comparator average.
Several factors contribute to high domestic airfares in Ghana. One major factor is the high fixed costs associated with aviation, including aircraft leases or financing, insurance, staff training, and certification. These costs remain the same whether a flight is full or half empty. Additionally, Ghana's limited scale and uneven demand make it challenging to sustain frequent services. Thin routes and limited demand also affect the viability of flights.
Another significant factor is the currency and input-cost pressure faced by airlines. Revenue is largely earned in cedis, while many costs, such as leases, engines, spare parts, and insurance, are paid in foreign currency. Fuel is also a major operating expense, and African airlines face high unit costs compared to carriers elsewhere. The depreciation of the cedi and fuel-price shocks can quickly pass into the cost base.
The government charges, including the Airport Infrastructure Development Charge, also contribute to high airfares. The charge adds GH¢100 to each one-way domestic journey or GH¢200 to a return trip. Infrastructure needs funding, but a fixed charge weighs more heavily on short domestic journeys and raises the lowest viable ticket price. The Russian-Ukraine and Middle East wars have also pushed fuel prices up, leading to higher fuel surcharges.
To address the high domestic airfares, the government is considering several measures. The Ministry of Transport, the Ghana Civil Aviation Authority, and Ghana Airports Company Limited are exploring options to reduce costs and stimulate competition. One proposal is to undertake comparative cost studies with selected developing and emerging economies where domestic airfares are lower. The government may also consider removing or reducing the airport infrastructure charge to lower operating costs and support lower airfares.
Key points
- The high cost of domestic air travel in Ghana is part of a broader cost problem in the country.
- The structure of the domestic airline market in Ghana has changed significantly in recent years, contributing to higher airfares.
- The government is exploring measures to address high domestic airfares, including comparative cost studies and potential reductions in airport infrastructure charges.
