Air travel holds potential despite Cedi woes

Source: B&FT Ghana - Depreciation of the Cedi against major trading currencies is only a temporary situation and would not affect air travel in the long run, Henok Teferra, Chief Executive Officer of Asky Airlines has said.

“I know there are momentarily challenges with respect to Ghana’s currency, this is a given in any country. There is no such thing as a smooth sailing over a linear path. But if you look at the overall trajectory of Ghana, over the past years from the airline perspective, we have seen strong steady and healthy growth. Yes there are challenges now but we think these are momentarily challenges,” he said.

The performance of the local currency has huge implications for the aviation industry where the cost of operation are benchmarked against the dollar. Aviation fuel, navigational charges, ground handling and airport taxes are all charged in dollars.

Domestic airlines, notwithstanding the slide in the local currency, had to absorb the exchange losses that were estimated to be about US$2million per operator.

This situation has severely impacted on the operations of domestic operator who have petitioned the supervising ministry, Ministry of Transport, to help mitigate the impact of the depreciating Cedi by suspending the imposition of a 17.5 percent Value Added Tax (VAT) on domestic air travel and waiving of import duty on imported aircraft parts.

The local currency has since January 2015 continued its poor performance in 2014 against major trading currencies. Measures introduced by the Central Bank to halt the rate of fall, by injecting US$20million per day to meet demand, temporarily slowed the rate of fall. But, it has since relapsed into its trajectory of poor performance against the dollar.

The earlier positive performance was largely attributed to a favourable review the International Monetary Fund (IMF) gave the country in its first appraisal of the 3-year funded programme.

The fundamentals are very strong. Africa with 1 billion population is a reservoir of a growing middle class. Therefore a reservoir for traffic. That is why many non-African airlines which were not interested in Africa 10-15 years ago are now flocking here because they have realized that this is perhaps the last frontier of globalization. This is where growth will be. This is a growth pole for the global economy as a whole. So if you take the long term view, which an airline should have because the airline industry is a long term business, then you we are very confident that Ghana will continue to be a strong pillar of our business and network.

“We see Ghana as a very important destination. Now we have daily flights and we plan to build on that to connect countries such as Sierra Leone, Liberia and Gambia through Accra.

“The fundamentals are very strong. Africa with one billion population is a reservoir of a growing middle class. Therefore a reservoir for traffic. That is why many non-African airlines which were not interested in Africa 10-15 years ago are now flocking here because they have realized that this is perhaps the last frontier of globalization.

“This is where growth will be. This is a growth pole for the global economy as a whole. So if you take the long term view, which an airline should have because the airline industry is a long term business, then we are very confident that Ghana will continue to be a strong pillar of our business and network,” Mr. Teferra said.