Small market, low incomes keep Ghana’s domestic airfares high, says Prof Peter Quartey
Economist Professor Peter Quartey has attributed Ghana’s high domestic airfares to a combination of a small aviation market, low incomes, taxes, fuel prices and the cost of capital.
Prof Peter Quartey, an economist, has explained why Ghana's domestic airfares are higher than those in other countries. He attributes this to a combination of factors including a small aviation market, low incomes, taxes, fuel prices, and the cost of capital. Prof Quartey made these remarks while discussing the high cost of domestic air travel and the overall cost of doing business in Ghana on Joy News' PM Express Business Edition.
He noted that this issue is not just limited to the aviation sector, but also extends to other sectors such as hotels and rent.
Quartey pointed out that Ghana's domestic aviation market is smaller compared to countries like Nigeria. He explained that Nigeria has a larger population and more heavy traffic, which allows airlines to charge lower fares due to competition. In contrast, Ghana's smaller market means airlines have to charge more to cover their costs.
Another factor he highlighted is the income levels in Ghana. He noted that income levels are not as high as in countries like South Africa, which means most people prefer road transport or buses over flying. The long history of operation of major African airlines such as Ethiopian Airlines and Kenya Airways was also cited as a factor. These airlines have been in the business for a long time, which could give them an advantage in pricing.
Quartey also criticized the high tax burden on the aviation industry in Ghana. He argued that these taxes are overburdensome and are ultimately passed on to consumers through higher airfares. He also pointed out that fuel accounts for a significant portion of airlines' costs, about 30% in fact. If fuel prices are higher in Ghana compared to other countries, it will naturally lead to higher airfares.
The cost of borrowing was also mentioned as a contributing factor. Even with loans that airlines must service, they still need to cover their operational expenses. Quartey believes that the long-term solution lies in expanding Ghana's aviation market and creating an environment that attracts more players. He emphasized that once the market is large enough and profitable, more investors would be interested in investing in such a business.
But if the market remains small and unattractive, those who operate it will have to charge higher prices to cover their costs.
Written by urgent.news from Joy Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
