Professor Peter Quartey, an economist, has identified several factors contributing to Ghana's high domestic airfares. According to him, the country's small aviation market, low income levels, taxes, fuel prices, and high cost of capital are all playing a role. These comments come amid growing concerns over the high cost of domestic air travel and the broader cost of doing business in Ghana.
Prof Quartey notes that the high cost of travel is not unique to the aviation sector, citing expensive hotels and rent as examples. He compares Ghana's domestic aviation market to that of Nigeria, stating that Nigeria's larger population and heavier air traffic lead to more competition and lower fares. In contrast, Ghana's smaller market means that airlines have to charge more to cover their costs.
Income levels in Ghana are another significant factor limiting demand for domestic flights. With most people relying on road transport due to low income levels, Prof Quartey argues that this restricts the growth of the aviation industry. He also points out that some major African airlines, such as Ethiopian Airlines and Kenya Airways, have been operating for a long time, giving them an advantage over Ghanaian airlines.
Prof Quartey criticizes Ghana's tax burden on the aviation industry, stating that it is overtaxed. He believes that these taxes are passed on to consumers, further increasing the cost of air travel. Additionally, aviation fuel accounts for about 30% of airlines' costs, and if fuel costs are higher in Ghana compared to other countries, this will contribute to higher airfares.
The cost of borrowing is another factor affecting Ghana's airlines, as they have loans to service while covering operational expenses. Prof Quartey suggests that the long-term solution is to expand Ghana's aviation market and create conditions that attract more players. By developing the industry and making it profitable, more investors will be willing to invest.
Prof Quartey's comments have sparked a wider discussion on the cost of air travel in Ghana. The Director of CUTS, a consumer advocacy group, has also weighed in on the issue, stating that almost everything in Ghana is expensive. The government has urged domestic airlines to reduce airfares after granting duty exemptions, in an effort to make air travel more affordable.
The issue of high airfares in Ghana remains a pressing concern, with many calling for a reduction in costs. Prof Quartey's analysis highlights the complexities of the issue, which cannot be addressed through a single solution. However, by understanding the root causes of the problem, stakeholders can work towards finding a long-term solution that benefits both the aviation industry and consumers.
Key points
- Prof Peter Quartey attributes Ghana's high domestic airfares to a combination of a small aviation market, low incomes, taxes, fuel prices, and high cost of capital.
