“We are fortunate to grow in Nigeria because of Nigerian airlines weakness”
The chief operating officer, COO of African World Airlines, AWA, Mr. Sean Mendis, is a man with vast knowledge in start-up airlines in Africa. Sean specialises in successfully conceiving, developing and executing start-up aviation projects in challenging conditions.
Sean was part of the launch management team of Ghana International Airlines and served in a management role there from 2005 till 2010. He left to manage other aviation businesses in some other African countries and returned to Ghana In 2018 as chief operations officer of AWA to guide the airline through its next stage of growth and route expansion.
In this interview with Franklin Ihejirika at the recently concluded 2019 Accra Weizo in Ghana, Sean who was part of the panel discussion on passenger experience, civil Aviation rules, and Immigration processes in interconnecting West Africa speaks on the challenges facing airlines in West Africa, the importance of Nigerian market to AWA, mutiplicity of taxes within the sub region, solution to the problems of high taxes, the need for West African governments to have an understanding of the aviation business, balancing safety with customer demand, among others.
Growth opportunities for West African carriers within the sub region
We had the opportunity to open a branch office in Abuja and so we start flying that way. So we are in that point here in West Africa where we are poised for probably about 20 to 25 years of very strong GDP growth but more importantly air traffic growing to double the rate of GDP. Now also is just a growth on the demand, on top of that, there is growth that has been kept down for the last 20, 30 years, so we still have to catch up on that and we will stimulate the market with more flights, with more low fares and so forth. So truly this is where the opportunity is and I think the sky is really the limit for west Africa, as far as been able to provide reliable safe air transportation.
Challenges facing the airlines in West Africa?
It’s a sad thing; I spoke on another forum earlier this week and I think I used the analogy that, if this was a football, we are just scoring own goals. There are enough challenges you face in West Africa; the markets are small, there’s security concerns in some parts of the region and health concerns in some part of the region; there are lots of small countries that have bureaucracies that you have to navigate.
Yet, we see airlines like Africa World Airlines and other private sectors carriers, who come into these markets, but we try to go out of our way to create more roadblocks and protectionism for them. And the example I gave is Cote D’ivoire where, for almost 18 months, African World Airline has been trying to get our license to operate there. They are not saying ‘no,’ but when you send something, they would say, ‘this translation is not good, get it translated again,’ or ‘this was sent to ministry of foreign affairs, it needs to go to ministry of transport.’ It’s constantly just bureaucracy, which looks for a reason to deny you rather than a reason to permit you. Even though at the end of the day, good, reliable and safe air transportation benefits everybody, including those in that market they are trying to protect.
You talked about the airfare, the cost of flying between West Africa and you also made a point that a large chunk of that money actually goes to government?
Absolutely, the example I will give is flying from Accra to Tamale in Northern Ghana, which is about 450 kilometers or Accra to Lagos, which is also about 450 kilometers. From Accra to Tamale, the tax for a domestic flight in Ghana is 5 Ghana cedis or 90 US cents. To fly Accra round trip to Lagos, the taxes are $170 give or take; I can’t even calculate how many percentage differences it is. So, when I have a sale and I can offer tickets from Accra to Tamale a 450-kilometer flight for as low as 99 cedis each way or 190 round-trip including tax, when I offer the same distance flight from Accra to Lagos, I’m charging 999 cedis and it’s less profitable to me even at that cost because quite simply it is the government that is profiting. I fly 4000 passengers a week to Tamale, if the taxes were just as low on Accra to Lagos, looking at how large the cities of Lagos and Accra are, we could be doing 10,000 passengers a week between those two if the taxes were lower. And those passengers will all come and stay in the hotel, buy cold drinks, buy ice cream, do everything else on which VAT is being collected. The government will benefit more by reducing taxes and encouraging people to actually travel.
Do you think that West African governments have an understanding of the aviation business?
I think there are two areas, which link into that. Number one is the understanding that travel is not just for the rich and for the elite; everybody wants to travel. I promise you, you can catch the poorest man without a house and you ask him, ‘would you like to travel?’ He would say ‘yes.’ The reason he cannot travel, the reason he sometimes believes travel is not for him is because of the cost of travel. But that does not mean we cannot lower the cost of travel and make it more accessible for people. At AWA we made it a huge priority to bring new travellers into the market. We have an offer every Wednesday which we call WOW Wednesday and on that sale we offer tickets from Accra to Kumasi lowest 49 cedis one way, that is about $8 one way. Initially people didn’t believe because this is cheaper than the bus fare. This Wednesday we sold over 2800 tickets and the beauty of this is when you look at the passengers who are flying for the first time, it is awesome. And we think first time fliers are college students, yes, they might be but in some case they are not. There was an old lady, and she was in the 90s, I guess she was living with the son going to visit the daughter in Kumasi and they said instead of putting you on a bus we will buy a ticket. And she was just so excited to be on a plane. It is the accessibility that low fares creates wider market that everybody should have an opportunity to fly, which I think by putting these heavy taxes by the government, they don’t quite realise that they are not improving the quality of life for their citizens, which they could do by making it more accessible.
And the second thing is the protectionism tendencies of governments in this region. They tend to have a believe that if somebody is making money government should also make money. And that isn’t what it should be, the government role is to create an enabling environment, to build the infrastructure and then benefit from the use of it. A government will benefit far more if they built an airport and charge reasonable fee for people to use it. More people would use it and they will recover their money back, than building an airport and charging outrageous fees so that only 10 flight a day come in and they charge each of them $10,000. You will make your $100,000, but if you charged everybody $1 and you had 100,000 people come in, you make the same amount of money. I think that’s where a lot of governments have a short-sighted view. Understanding the politics, it goes back to that perception that traveling is for the rich. You cut your airport taxes, everyone says, ‘they are giving tax breaks to the rich, what is the poor man going to benefit.’ The poor man will benefit far more from having lower taxes and more accessibility to travel because he can improve his quality of life through that.
Are these charges peculiar to this market
They are not peculiar to West Africa; everywhere in the world, you have taxes. If you go to the UK for instance, their taxes are even worst than West Africa in some cases. But West Africa disproportionately has it, Ghana and Nigeria strange enough. But if you go to Liberia or Sierra Leone, I wish they only had $60 and $70 taxes. You fly round-trip between Freetown and Monrovia, my fare is $49 round-trip, taxes are $324 on top of that. Now, you tell me, who is making the money when a passenger travels? They don’t fly, besides it’s not safe to drive on the road; the roads are poor. They are taking boats, which are not safe. How does anyone benefit from the high taxes other than the government agency that is charging the tax?
In relation with naira in Nigeria and denominating transactions in Ghana, do you think the dollar has anything to do with it?
There is certainly a currency risk involved and there is a loss of value when a currency is devalued. But in reality a good economy shouldn’t be affected by that because a good economy is self-sufficient in it most critical needs. Now, in Ghana we make it a point that our domestic fares is priced in cedis, now that has hurt us this year but for international fares we price in dollars. Because the people are earning in cedis my domestic customer is earning in cedis so he has to pay in cedis, even though most of our cost for the most parts are in dollars. The staff salary is in cedis but I have to pay for fuel in dollars, I have to pay for airport taxes in dollars it is only the domestic airport tax which is pegged at 5 cedis. It is a big challenge but something we are committed to is that cedi is the currency and we are a Ghanaian carrier, we must be able to operate in cedis to the best of our abilities.
What do you think should be the solution to the high taxes?
Consumer confidence, when the consumer has confidence in cedis and naira and are happy to save in cedis and naira and spend in cedis and naira, and then the merchants make investments nominated in cedis and naira, that is really the way it is built. It is not an overnight process, it is going to require government to have sound monetary policy. Ghana and Nigeria are fortunate that they have become stable democracy where multiple parties have election and sometimes they win and loss. The flipside of that is that it is good for democracy but it is not necessarily good for monetary policy. For example, this year for the Nigerian elections the traffic between Accra and Lagos or Abuja was down at least 30percent. Nobody was traveling, they wanted to see what happens in the elections.
How seamless is travel in West Africa today?
Seamless travel, we are getting there. I think there are lots of good initiatives; infrastructure is everything. A lot of reason people get frustrated at boarders and airports is the small stuff; the airport is too crowded, the air conditioners are not working, the system is down, so they have to do it manually. Improving that infrastructure will give them the tool. I don’t think the government bureaucracy wants to give you bad experience, but they don’t always have the resources to get things done because of misplaced targets of where they can generate their revenue from.
How do you balance safety with customer demand?
I will be blunt here to say there is no balance, it is 100 percent safety. I promise you, if your safety record wasn’t good your customer demand will be zero. Customers want safety above everything else. Eight years ago when we were starting Africa World Airlines, we did surveys of prospective of passengers and asked, we gave them a list of criteria and asked them what was their number one reason for choosing an airline. And in West Africa 90percent plus said safety. Today when we do that same survey, 30 percent say safety is the number one reason. Not because people think that safety is less important, but they takes safety for granted. They believe that AWA and a number of other airlines in West Africa have made advances in safety to the point where safety is no longer a consideration. They genuinely believe that when an airline is flying, it is going to be safe and I think that is one of the things we are proud about.
How important is the Nigerian market to AWA?
Nigeria is our biggest market outside Ghana. Nigeria is the biggest economy is Africa and it’s right on our doorsteps; we would be foolish if we didn’t look at Nigeria as the best opportunity for us. We have been very fortunate that we have been able to grow in Nigeria because of the weakness of Nigerian airlines for the last few years. The airlines which have existed have not been reliable in recent years. Nigerian businessmen don’t like admitting that a Ghanaian company is doing a better job than them.
So Nigeria will continue to see growth from us and hopefully we will continue to open more gates with more flights in Nigeria. Right now, we are flying 192 times a month to Nigeria; up to five times a day to Lagos and 10 times a week to Abuja.