[ 2015-07-29 ]

World Bank withdraws cash for national airline
The World Bank has withdrawn its financial support
for government's initiative to establish a new
national airline.

This follows a review of the pre- feasibility
report submitted by the supervising ministry to
the Bank for perusal.

The process to establish a new national airline,
after the collapse of the state-owned Ghana
Airways, started in earnest last year and is being
financed using part of a US$30million PPP
programme facility from the World Bank.

An initial pre-feasibility report submitted to the
World Bank for review and approval - otherwise
termed "no objection"- came back with the decision
not to continue funding the process, as the model
contained in the report seem more commercial than
a PPP arrangement.

Chief Director of the Ministry of Transport,
Twumasi Ankrah- Selby said "the process is still
on-going. We have had discussions with the bank
and they had a different position as to where we
are with the study, because we have finished with
the pre- feasibility and was going on to the
feasibility.

"But they felt that following from the pre-
feasibility, it was more of a commercial venture
than a PPP arrangement. So their thinking at the
time was that at this stage the Ministry can go
ahead with its commercial arrangement. This is
because they try to support PPP arrangements - but
the way the study came out and the approach, it is
more commercial than on a PPP basis.

"What they are saying is that at the
pre-feasibility stage we have identified the path
that we should follow. So if we are to go ahead,
then we have to finance the arrangement we have.
For now they feel that we should go ahead with the
commercial arrangement, therefore they will not be
able to continue with us," he said.

Government's latest attempt to establish a
sustainable and profitable airline is the third
since independence following the demise of the
erstwhile Ghana Airways and Ghana International
Airlines, due mainly to mismanagement and abuse of
power.

Ghana Airways was founded in 1958, and for decades
was the national airline with Kotoka International
Airport (KIA) as its hub. However, the airline,
ridden with debt, ceased operations in 2004.
Attempts were made to revive its fortunes, but to
no avail: in June 2005 it was liquidated.

With the support of private investors, Ghana
International Airlines (GIA) was established in
2004 after Ghana Airlines' demise. The airline
faced difficulties and eventually suspended its
operations in May 2010.

In the proposed new arrangement, government is
seeking a carried interest and a partner with
experience in running an international carrier.

Questions were however raised by some analysts,
who spoke to the B&FT earlier in the year about
the feasibility of some key projections in the
draft pre- feasibility report cited by the
newspaper.

The report, at the time, projected that the new
national airline will record an operating profit
margin of 10.1 percent in the first year of
operation; 10 percent in year two; 7.5 percent in
year three; 11.6 percent in the fourth year; and
an astounding 13.8 percent in the fifth year.

However, a number of operators in the aviation
sector raised serious doubts about the key
financial ratios and timelines raised in the
report, as they depart from industry standards.

Government is nonetheless optimistic about the
success of a new national carrier, given the
growing importance and ability of the country to
cater for transit passengers and tourist from the
sub-region, Europe and the Americas.

"As a government we are going ahead with the-
arrangement, because we know the importance of
establishing the airline for our objective of
establishing KIA as an aviation hub," Mr. Selby
said.

Ghana Airport Company data show a significant
growth in transit passengers and cargo throughput
for the Kotoka International Airport (KIA) for
2014, pointing to the growing importance of Ghana
as an aviation hub in the sub- region.

Transit passengers increased from 162,000 in 2013
to 178,000 in 2014, representing an increase of
some 9.5 percent. Cargo throughput also increased
by 24.5 percent from 44,000 tonnes in 2013 to
54,000 tonnes in 2014.

The increase in transit passenger throughput has
been attributed to the growing presence of
regional and international airlines in Ghana and
the choice of consumers to use the KIA for on-ward
connections to mainly Europe, the Gulf, and Asia
due to the good safety record of the country - bar
the recent cargo aircraft accidents in recent
times.

Source - Bus & Fin Times

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