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Mendis: Governments Don’t Operate Airlines Efficiently

The Chief Operating Officer of the Africa World Airlines, Sean Mendis, in this interview says it will be difficult for the government in Africa to successfully establish profitable national airlines. He also notes that West Africa has the potential to become a huge air travel market. Chinedu Eze provides the excerpts:

How do you see the West Coast Market?
I think the market has depressed in West Africa. This is because economic development in the sub-region has not been strongest. There have been civil war and unrest, Ebola and things like that; all of which have depressed the market for business travels as well as for tourism. There is also the problem of infrastructural development and so forth. So we strongly believe as African airliner and as West African airline, in particular, whose goal is to connect the region better; that this is a market that we are going to bear; so we are investing and are looking at the long term. We are fortunate enough that the product we are able to offer to the market here both with our aircraft size and more importantly I think with our reliability and so forth, is something that would allow us to get returns early, but we are here for a long term and we genuinely believe that the intra-regional travel in West Africa is where the future is going to be. It has been depressed for too long that the market is now ripe for one or two or three well rounded carriers to come in to give the travelling public the service they need and to reap the benefit of doing that.

Ghana seems to be having plans to establish a national carrier; do you think they will continue to be hospitable to AWA when they have a national carrier?
We have discussed this issue regularly with the Ministry of Aviation in Ghana and our public statement is why we support the concept of the home-based carrier, which is what the Ministry calls it. We disagree slightly with what the Ministry stands on what should be involved. While the Ministry wants what the traditional airline should be, which is a legacy model of a national airline, we believe that the home-based carrier can be a collection of airlines who are committed to using your home base as the hub. Whether that will involve working in partnership with mergers or in various ways to cooperate, the result is the same as bringing passengers through your airport, using your infrastructure better, creating more jobs for your aviation economy; generally increasing tourism, hospitality and so on. As a result, there is an overall benefit to the entire industry and the entire sector rather than if you just had a single government owned airline. So while we fully support the concept, we believe that there needs to be more commitment towards a hub in Accra and so forth. We don’t necessarily agree that there should be a nationally owned airline or government in partnership with other airlines, but we are not the government; we are working with the government to develop others.

The Director-General, Airport Council International (ACI) World, Angela Gittens said that national carriers are usually inefficient and the government strives to fund it, even when it is not doing well. Do you agree with that observation?
I think that is absolutely true. Any company whether is privately or government-owned operates for the benefits of the shareholders. The problem you have is that in a privately owned business, the goal of the shareholders is usually to get a return on investment. To do that it will have to operate profitably, efficiently and so forth. A government has strategic priorities other than just profit, a government may be looking at just creating employment or servicing a region that is traditionally not being served and as a result, it may bend backward to service that route and this will force it to engage in inefficient or market skewing behaviour.

The problem is when the government is the shareholders of the company. It becomes the leader rather than followers, even when its airline should not be leading the industry. I think that is where the concept of having government driving the strategy should never be the case as I mentioned during the panel discussion: the government’s role should be creating an enabling environment.

In your growth trajectory when are you going to start looking beyond West Africa?
AWA is just seven years old, so when we first started our operations in 2012, we had five years business plan and that ran us through 2017 or so and at that point in time the board sat down to look at where do we want to go next. There were three general strategies the board looked at; the first was should we become like an Emirate of West Africa and bring in a big plane, using Accra as a connecting hub? We looked at it and said the infrastructure is not really strong here; it is not Dubai. We do not have the timing it would take to build ourselves up to that, relative to the money we need to invest. We take cognizance of government-related investment and other stakeholders, but we know it will take longer for a return on investment right now. So, we put that on one aside, the second option was to go in where there are larger narrow bodies and serving wider Africa with Boing 737 and so forth and that was something we really considered. But once again, we looked at it in terms of what was involved because this would require a certain amount of capital investment and we are not sure that such investment would be very profitable enough.

But when we looked into it, we said that would be taking what is now profitable, efficient airline and going into the risk of investing in what might bring losses for the short term to come out with a bigger profit in the long run. The decision of the board that time was, let’s not take something that is working and change that model; let us build a stronger one. This brought us to the third one, which is basically apparent five-year strategy. We want to become the dominant regional airline in West Africa and we will increase our brand’s presence to the rest of the world by partnering with other airlines. So if you noticed, we have a strategic partnership with South African Airways for almost a year, which has paid off big time for us, we got a lot more connecting passengers for them. If you noticed in the last few months since January, they have switched from flying four times a week from Accra to Washington to flying three times to Dakar to commuting a 100 percent daily from Accra to Washington.

We have partnered with Emirates, Ethiopia Airlines and we got another partnership with European carrier, which is going to be announced next month. We believe that we have been able to do the last mile delivery for carriers like Emirates that can bring in Boeing 777 worth of passengers into Accra, but you go to smaller markets like Freetown in Monrovia that cannot fly in bigger planes; we are an ideal partner for them by being able to give them airplanes that have international safety and reliability standards. I think by naming our airline, Africa World Airline (AWA), we are African airlines but we are also world-class standards and I think it really sums up where we are right now and where we should be in the next few years as well.

Are you optimistic about the Single African Air Transport Market (SAATM) and do you think it will work with the way some countries are reluctant to embrace the open sky for Africa?
I think SAATM is a wonderful concept but I also think SAATM is the Yamoussoukro Decision and Declaration before that, so a lot of this is in theory; but it is how you execute on them that is the key. SAATM is something we are ready now and I firmly believe that more competition is best for us. We encourage the government of Ghana to have a unilateral open tax policy; if airlines want to fly to Ghana let them fly. I see every new passenger who comes into Accra as a potential partner for me and to ensure onward passengers for them.

So we want that to happen, but at the same time; there has to be reciprocal access and this is where we struggle. You mentioned Côte d’Ivoire. AWA has been trying to get a permit to fly to Côte d’Ivoire for almost one and a half years now. We have the highest traffic in Abidjan and we have office, aircraft, and crew ready to start flying to Abidjan. These things are sitting on the ground costing us money every single month. We have engaged with the government of Côte d’Ivoire, we have our government engaged with their government and authority at that level, but we are not still making enough progress.

However, we are optimistic that we will have a launch date for operations there soon. At the same time, an airline from Côte d’Ivoire flies daily to Ghana. At the same time, South Africa Airways is allowed to operate between the markets, Egypt Air flies between the markets, Emirates flies daily; a none African carrier comes with Boeing 777 everyday, lands in Accra picks passengers, takes them Abidjan. Yet, Côte d’Ivoire for reasons they have not made clear to us is resisting another African carrier from coming in.

That is where protectionism exists and would always exist. Everybody, no matter how neutral you are, you want your team to win, I do not mind the situation where you are favouring non-African airlines over your neighbours’ and I stress this to the bureaucrats in Côte d’Ivoire and other places; and this is something I learned from CEO of Air Peace, Mr. Allen Onyema. Ghana and Nigeria are probably the best examples of people willing to take the lead, but the francophone countries in West Africa, in particular, Côte d’Ivoire is the one I would point a finger that tends to want benefit but without being reciprocal about it. In our society, you know that the person that comes to your house and eats and never invites you back will never be your friend for life and I think that is something that needs to change if we are going to be able to truly implement SAATM going forward.

There has been a closure of the Nigerian borders to its neighbours in West Africa to curtail land movement; do you think this is helping your airline’s load factor?

To be honest, a lot of Nigerian markets are very strong, so it would be very hard to know. But definitely we have seen, I cannot link it directly because we saw this happening from the beginning of summer, say about late July all the way through to now; there has been an obvious increase in passenger demand and we are obviously meeting the demand and we are putting in more flights, continuing to grow our services by 34 times to Lagos, 11 times to Abuja, huge demand on services we are putting in and is going to grow.

The first quarter this year in Nigeria was horrible for us and we were having discussions to reduce flights and our decision was no, if you are committed to market believe me people would remember when times were bad. We cannot be a Ghanaian airline and not consider Nigeria an important market. It is our second and most important market. It is on our doorstep. They speak the same language and Nigerians and Ghanaians are brothers.


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