We are taxing, overtaxing the industry – Prof Quartey on high domestic airfares

Economist Professor Peter Quartey has blamed Ghana's high domestic airfares on a mix of taxes, fuel expenses, the small market size, and the high cost of capital. This assessment was made during a discussion on Joy News' PM Express Business Edition. Prof Quartey highlighted that the cost of operating in Ghana extends beyond the aviation sector, noting that hotels and other services are also pricey.

He pointed out that Ghana's domestic aviation market is smaller compared to that of countries like Nigeria. The larger population and higher traffic in Nigeria allow airlines to operate more aircraft and compete within a bigger market, leading to lower prices. Prof Quartey also mentioned that Ghana's smaller market and lower income levels contribute to the reluctance of passengers to use domestic flights over road transport.

Additionally, the length of time some major African airlines have been operating in the industry has affected their costs, making their domestic and international flights comparatively cheaper. However, Prof Quartey emphasized that the tax environment in Ghana is particularly burdensome. He stated that the tax burden ultimately gets transferred to the passengers, who ultimately have to pay more due to the high costs of doing business in the country.

Factors such as borrowing costs and aviation fuel, which account for about 30% of airline operating expenses, also contribute to the overall high prices. Prof Quartey urged for the development of the industry, arguing that expanding the market and creating a more favorable business environment would attract more operators. He emphasized that once the market is large enough and the business environment is favorable, investors would flock to a profitable industry.