Fuel, taxes and loans are driving up airfares – Prof Quartey

Economist Professor Peter Quartey has identified several factors driving up Ghana's domestic airfares. Speaking on Joy News' PM Express Business Edition, the professor highlighted the role of taxes, aviation fuel costs, loans, and the small size of the local market. Prof Quartey noted that the high cost of doing business extends beyond the airline industry, noting that hotels and other expenses are also expensive in Ghana.

He pointed out that Ghana's smaller aviation market makes it challenging for airlines to achieve economies of scale like those in larger markets such as Nigeria. With a smaller population and less traffic, airlines in Ghana may charge higher fares to cover their costs. Prof Quartey also cited lower income levels as a factor limiting demand for domestic air travel, as many people prefer road transport over flying.

He further attributed the high cost of air travel to the age and experience of airlines operating in other markets. Established carriers like Ethiopian Airlines and Kenya Airways have been in business for a long time, giving them a competitive edge. The economist also pointed out that Ghana's tax environment contributes to the high cost of air travel, with the country imposing a higher tax rate compared to many African nations.

Aviation fuel costs, accounting for about 30% of airline operating expenses, were also identified as a significant pressure on airlines. Prof Quartey emphasized the need for greater investment in Ghana's aviation market to attract more players and make it more attractive for investors. He stressed that once the market becomes sufficiently developed and profitable, more investors would be willing to enter the industry.