High Cost of Domestic Airline Fares: Can government do something about it?

A recent social media post highlighted the high cost of domestic air travel in Ghana, revealing that many consumers now view flying domestically as unaffordable for ordinary workers and families. The post's attention is a starting point for investigation, not evidence of exploitation. The issue can be attributed to a broader problem known as "the Ghanaian pricing culture," which affects a wide range of goods and services, including hotel rooms, residential accommodation, office rent, car rentals, imported equipment, and professional services.

Airlines also face aviation-specific costs such as fuel, maintenance, insurance, and airport charges, which are priced in dollars. The high cost of domestic flights can be attributed to several factors, including the structure of the aviation industry, limited scale, currency and input-cost pressures, limited competition, and government charges.

While airlines face high fixed costs, thin routes and uneven demand make frequent service challenging. Airlines also face currency and input-cost pressures, as revenue is earned in cedis while leases, engines, spare parts, insurance, and maintenance are often paid in foreign currency. Fuel is a significant operating expense, and African airlines face higher unit costs than carriers elsewhere.

Competition in the market is limited, with only two airlines operating in Ghana's domestic market, which reduces the pressure to discount, innovate, and pursue marginal passengers. The government charges, such as the Airport Infrastructure Development Charge added to each one-way domestic journey, also contribute to the high cost of domestic flights.

The Russia-Ukraine and Middle East wars have driven fuel prices to unprecedented levels, forcing airlines to charge fuel surcharges to recover costs and make a profit. The government's ambition to make Accra an aviation hub for West Africa requires deliberate action to address the factors driving up domestic airfares.