The skies are clearing for aviation growth

Air travel is growing rapidly in Ghana, as the country’s population takes to the sky and more tourists and businesspeople visit the country. Plans are under way to develop Ghana’s major airports to keep pace with growing demand, while the government is also seeking a private investor to help re-establish a national airline.

GACL

Ghana’s commercial airports are operated by Ghana Airports Company Limited (GACL). The aviation group operates four airports including Accra’s Kotoka International Airport (KIA) – the country’s largest airport by some margin and the only international facility – and airports at Kumasi, Tamale and Sunyani.

GACL posted GHS19.1m ($7.28m) in profit in 2013, following a GHS84.2m ($32.1m) loss in 2012. This uptick was the result of increased income from its revenue streams and effective cost management measures to improve its bottom line. Aeronautical revenues grew 37% to GHS287,525 ($109,605) in 2013, while non-aeronautical revenues rose less than 3% to GHS25,062 ($9554), a relatively small figure, which suggests that the company could make greater use of the retail and leisure potential of its airports. Royalties, meanwhile, fell to GHS14.5m ($5.53m) from GHS15m ($5.72m) in 2012.

Airports

“KIA’s terminals are constrained and require expansion. However, the runway determines airport capacity, and the airport can operate for many more years, with congestion eased by expansion and improved airside infrastructure,” Essie Anno Sackey, managing director of PHI Century, told OBG. Performance indicators for KIA support this. In 2013 KIA handled 23,437 aircraft movements, up 6.1% from 22,082 in 2012 and 17,481 five years before, in 2008, according to GACL. International passenger numbers fell 3.3% to 1.67m, from 1.73m in 2012, but up from 1.19m in 2008.

Overall freight tonnage fell to 43,688 tonnes from the 46,577 tonnes recorded in 2012. The drop can be attributed to the global economic climate, with slowing business activity and cost pressures leading to a shift towards sea freight from air freight, particularly between Ghana and Nigeria, a major African trade partnership.

Increasingly Busy

Domestic air traffic continues to grow strongly. Aircraft movements rose 28.9% to 18,497 in 2013, from 14,352 in 2012 and 10,091 in 2011. Passenger numbers jumped 43.3% to 778,466 from 543,379 in 2012 and 199,073 in 2011. “Europe remained the most travelled destination, with a market share of 33.1%, followed by West Africa, with 23.6%. The Middle East, East and Southern Africa, North America and North Africa, in that order, comprised the remaining 43.3%,” Charles Asare, acting managing-director of GACL, told the press in August 2014.

Development

Throughout 2013, GACL invested in improvements to KIA designed to enhance passenger experience, including installing new check-in desks, baggage carousels, and screening and security equipment. Fuel mains were extended to accelerate aircraft turnaround time, and guidance lighting was also added.

In June 2014, work started on the $21.4m expansion of terminal 2 at KIA – the main international terminal. The project will nearly double the size of the terminal’s arrivals hall from 6031 to 11,179 sq metres. It is slated for completion at the end of 2015, but the first phase should be complete by year-end 2014, easing some pressure in the short term.

As well as capacity increases, including expanding immigration and baggage handling facilities, there are also plans to upgrade electronic systems and plumbing. Phase two will see office space expanded. The project is being funded by GACL and executed by local contractor Amandi Holdings.

Rapidly Outgrowing Itself

At the time of research, the prequalification phase for the construction of a third terminal at KIA was also under way, to be followed by invitations for technical and financial proposals. Work is ongoing to expand airside capacity to take more wide-bodied aeroplanes, including the Boeing 747-800. However, if passenger numbers continue to grow at their current rate, extensions to KIA will not be a sufficient long-term solution. A remarkably central airport, KIA is now hemmed in on all sides by Accra.

Plans are afoot to build a new airport outside of the city, but progress has been slow. In September 2012, the government signed a memorandum of understanding with China Airport Civil Construction Company (CACC) to undertake feasibility studies for the new airport. In May 2013 the government announced that it had acquired 6475 ha of land in the Ningo-Prampram area of the Greater Accra region and that it would undertake further studies for the construction of the airport, which would be the centre of a 24,280-ha “aerotropolis” of businesses catalysed by the airport’s presence. In July 2013, CACC presented GACL with its preliminary designs, which would cater to 4.5m passengers and 33,835 passenger aircraft movements a year, with a maximum of 12 movements an hour. Cargo capacity would be at 30,000 tonnes annually, while the terminal area would be 45,000 sq metres, and the airport would have 7000 sq metres of warehousing.

Regional Expansion

In November 2013, parliament approved a $100m contract for Brazil’s Construtora Queiroz Galvão for the design and construction of an international airport at Tamale, in the north of the country. The project will take 18 months to complete and will significantly develop the existing airport, strengthen and extend the runway from 2438 to 4000 metres, as well as expand the aprons around it. The aircraft standard model used in the runway design is the Boeing 747-800, an intercontinental aircraft.

Officials expect that airport development will help support growth in northern Ghana and improve connectivity across the wider region. The airport will be used for domestic passenger travel, tourist access to the region and exports of agricultural products. Media reports suggest that Tamale’s airport might, over the longer term, be developed into a huge complex serving as a hub for West Africa and the Sahel, thus capitalising on its central location.

In 2012 GACL announced a raft of investments including $173.2m for Kumasi airport. The plan is to upgrade it to meet international standards, appropriate given the population and importance of the Ashanti region, of which it serves as capital. A $17.5m programme to rehabilitate parts of the airport to improve safety was well under way at the time of research, and slated for completion in November 2014. However, in July 2014, Bawah Mogtari, deputy minister of transport, told local media that the project to transform Kumasi into an international airport had stalled due to lack of space.

National Carrier

Ghana is served by around 30 airlines, but does not have its own national carrier. Ghana International Airlines (GIA), 70% owned by the state, suspended its operations in 2010 after less than five years, having succeeded the defunct Ghana Airways as the national flag carrier. Both airlines were loss-makers and suffered from poor management and political interference. GIA was caught in a squeeze between high costs and low revenues. Nevertheless, plans are afoot to establish a new national airline. The government is looking to attract an investor that could potentially take a majority stake in a new national airline, with the state retaining a share.

In November 2013 a Ministry of Transport (MoT) official announced that it would choose a partner to take a majority stake in a new carrier by the end of 2014, with the state taking a stake of no more than 10%. “The government wants a public-private partnership (PPP) with the private investor playing a leading role,” Ellis Hugh-Tamakloe, head of monitoring and evaluation at the MoT, said. In August 2014, PwC was selected as the transaction advisor for the new national airline. While the process of establishing PPPs in the transport sector more broadly was still a work in progress, the legislation is currently all in place and the establishment of a new airline is still very much the plan.

Staying On The Agenda

A new national carrier would boost Ghana’s connectivity, and act as a catalyst for the country to become a regional air hub. It would also increase the country’s accessibility and visibility to tourists, supporting the growth of tourism, a central part of economic diversification. Conversely, some sector analysts say that the need for a national airline is not pressing, given the fact that current demand is well served by those already flying to the country. Some airlines have even pulled back from Ghana in recent years, most notably Virgin. “There are many airlines serving the Ghanaian market, with more airline seats per capita in Accra than in Lagos,” Kevin Markette, general manager of Lufthansa Ghana, told OBG.

There are other challenges as well. “The entire aviation industry is trying to reduce costs across the board, including catering spend,” Yves Palazot, managing director of Servair, told OBG. “Some will even purchase meals for 90% of passengers, knowing that a number of passengers will probably not request a meal.”

But others see substantial potential in Ghana as a regional centre. In July 2014, South African Airways (SAA) announced that it was eyeing Accra as a potential hub for West Africa as it seeks to expand across the continent. SAA’s main hub is Johannesburg, an inconvenient transit point for many passengers flying between destinations in Africa, and from Africa to Europe and Asia.