Starbow’s demise: what next?

The country’s only remaining domestic air operator, Africa World Airlines (AWA), is to take delivery of a bigger equipment early next year to help it meet the current demand for domestic air services between Accra and Kumasi, Tamale and Takoradi.

The decision follows the suspension and subsequent laying-off of Starbow staff – the only other domestic operator – after its Accra-Kumasi bound flight skidded off the runway at Kotoka International Airport (KIA), damaging the plane and with a handful of passengers sustaining minor injury: one passenger needing emergency treatment at the Korle-Bu Teaching Hospital.

Captain Samuel Thompson, Chief Operations Officer of AWA, told the B&FT: “By the end of the first quarter next year, we will acquire an E190 that is bigger and help us meet the current demand,”

The E190 is described by aircraft manufacturer Embraer as a regional aircraft with mainline capabilities. It is designed to offer customers one of the most spacious interiors of all single-aisle aircraft.

AWA in response to Starbow’s suspension of operations last week, has increased its flight frequency between Accra and Kumasi to 6x per day; and Accra-Tamale 5x per day.

Domestic airlines’ rise and demise

Antrak Air and City Link led the growth of domestic air travel in the country about a decade ago. They were later joined by Fly 540, Starbow and Africa World Airlines (AWA).

A combination of managerial fragilities, difficult operating environment for airlines, lack of financial muscle in a cash-intensive industry, and poor equipment choice are but a few of the challenges that brought most of the domestic operators to their knees.

City Link suspended operations five years ago due to various reasons. Fly 540 – a part of African Airline Group, FASTJET – also in May 2014 suspended all operations, saying: “The Company intends to fully focus on the considerable potential of opportunities in East and Southern Africa, and this legacy 540 operation is not therefore part of the core low-cost FASTJET model”.

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Antrak Air, a pioneer in domestic air travel, initially suspended its operations for three months in June 2015 following challenges with its wet lease arrangement with Swift Air, a Spanish airliner, for the use of the latter’s two ATR 72-500 turbo-prop aircraft.

The airline, in a statement announcing its decision to suspend operations said: “During this period we will be looking at reorganisation, as it concerns our business model. We have been compelled to strategically suspend all operations from the domestic market, with the aim restructuring to meet the rapidly changing and competitive environment.

“We are in advanced talks to take delivery of our own aircraft, which will give us more flexibility and less restrictive scheduling. We will return with the most convenient schedules, competitive fares and friendly service.”

Unfortunately, any such reorganisation has taken more than two years – with no hope yet of resuscitating the pioneering airline.

The collapse of the three main domestic airlines left Starbow and AWA as the only two carriers offering domestic air services to four main destinations across the country.

Starbow’s suspension of operations about a week ago has now left only AWA to serve a growing demand for domestic air travel.

 

The domestic aviation market’s future

The domestic airline market future lies in policy and finance.  The present government has showed its commitment to grow the industry by setting up a dedicated ministry for aviation, and removing VAT from domestic air transport.

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The Ghana Airports Company Limited (GACL), the country’s airports operator, has invested heavily in the construction of a new airports in Ho and total renovation of the Wa Airport.

Kotoka International Airport (KIA) has also undergone large scale expansion. All these were funded by loans secured on the books of the GACL.

This therefore requires a concerted effort on the part of policymakers to attract and nurture domestic airlines to attain such a height that they can confidently and comfortably service all these airports so the GACL can pay off those loans.

Experts have advocated a five-year tax holiday for domestic airline operators to help them grow, and then tax them after that.

In such a highly capital-intensive industry as aviation, a stable source of finance for existing and new entrants is crucial. While many industries have dedicated funding sources from which they can borrow at very minimal interest, there is nothing of that sort for Ghana’s aviation industry.

For instance, the unit cost of an Embraer 190 is about US$32million; an ATR 42-500, US$12.10million; and an A319 is US$89million.

Cost of the registration process and yearly licence renewal fee, all dollar-denominated, is also a big challenge for prospective and existing entrants.

The prospects for domestic operations between Accra and Kumasi, Tamale, Sunyani and Takoradi; and inter-regional flights between Accra-Kumasi; Kumasi-Tamale; and Tamale-Takoradi are huge.

With proper corporate governance, strong financial partners, the right staff and equipment and the right policies, domestic airlines can succeed – as AWA has shown.

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