‘Government will benefit more by reducing taxes and encouraging people to travel’
At the just concluded Accra Weizo, the West Africa Travel Market, seamless travel within the sub-region was a major point of discussion. Held at the La Palm Royal Beach Hotel, Accra, Ghana, the aviation session saw the panelists and participants exchange views on the challenges and prospects of inter-connecting West Africa. In this interview with CHUKS NWANNE, the COO of Africa World Airline (AWA) Sean Mendis, who was part of the panel, spoke on West African aviation industry and how government taxes is killing the sector.
What’s your opinion about the aviation industry in West Africa?
West African aviation market in reality is the market that probably has some of the best potentials in the world right now. The main reason for that is because airlines in the past have failed to provide the services consumers in this market need. I will give you a statistics, in most part of the world, when per capita GDP is bellow a thousand per capita in a low income country, the air traffic growth grows in more or less the same with the GDP. But when you come into this lower middle-income range of 1000 to 5000 per capita GDP, which is where West Africa is reaching now – Ghana is in that range, Nigeria is largely in that range, you see Cote Devoir and other countries coming into that range – you see that air traffic grows at double the rate of GDP. If you think about it, there’s actually a good reason for that.
What are the reasons?
The first thing that somebody buys when they have consumable income is consumer good; they buy TV, air conditioners and stuffs like that. The second thing that they do is that they buy travel. It’s not just holiday, but you see more entrepreneurs doing that. An entrepreneur, who might be working in Lagos says, ‘hey, there’s an opportunity to open up an office in Abuja’ and so he starts flying that way. A person, who is working in Ghana says, ‘I need to expand my business to Monrovia,’ and they start traveling in that respect. So, we are at that point in West Africa where we are poised for probably about 20 to 25 years of very strong GDP growth and more importantly, air traffic growth growing at double the rate of GDP; that also is just a growth in the demand. On top of that, there’s growth that has been kept down for the last 20 to 30 years. We are trying to catch up and we will stimulate the market with more fight and more low fares and so on. So, truly, this is where the opportunity is and I think the sky is really the limit as far as being able to provide reliable, safe air transportation.
You spoke about the challenges in this market, could you share some of them?
It’s a sad thing; I spoke on another forum earlier this week and I think I used the analogy that, if this was a football, we are just scoring own goals. There are enough challenges you face in West Africa; the markets are small, there’s security and health concerns in some part of the region; there are lots of small countries that have bureaucracies that you have to navigate. Yet, we see airlines like Africa World Airlines and other private sectors carriers, who come into these markets, but we try to go out of our way to create more roadblocks and protectionism for them. Example is Cote D’ivoire where, for almost 18 months, African World Airline has been trying to get our license to operate there. They are not saying ‘no,’ but when you send something, they would say, ‘this translation is not good, get it translated again,’ or ‘this was sent to ministry of foreign affairs, it needs to go to ministry of transport.’ It’s constantly just bureaucracy, which looks for a reason to deny you rather than a reason to permit you. Even though at the end of the day, good, reliable and safe air transportation benefits everybody, including those in that market they are trying to protect.
There’s been this issue of high airfare in this market, what’s you take on that?
Absolutely, the example I will give is flying from Accra to Tamale in Northern Ghana, which is about 450 kilometers or Accra to Lagos, which is also about 450 kilometers. From Accra to Tamale, the tax for a domestic flight in Ghana is 5 Ghana cedis or 90 US cents. To fly Accra round trip to Lagos, the taxes are USD170 give or take; I can’t even calculate how many percentage differences it is. So, when I have a sale and I can offer tickets from Accra to Tamale a 450-kilometer flight for as low as 99 cedis each way or 190 round-trip including tax, when I offer the same distance flight from Accra to Lagos, I’m charging 999 cedis and it’s less profitable to me even at that cost because of government taxes. I fly 4000 passengers a week to Tamale, if the taxes were just as low on Accra to Lagos, looking at how large the cities of Lagos and Accra are, we could be doing 10,000 passengers a week between those two if the taxes were lower. And those passengers will all come and stay in the hotel, buy ice cream, do everything else which vat is being collected. The government will benefit more by reducing taxes and encouraging people to actually travel.
But it seems governments in this region don’t have a good understudying on how the aviation sector works?
I think there are two areas, which link into that. Number is the understanding that travel is not just for the rich and elite; everybody wants to travel. I promise you, you can catch the poorest man without a house and you ask him, ‘would you like to travel?’ He would say ‘yes.’ The reason he cannot travel, the reason he sometimes believes travel is not for him is because of the cost of travel. But that does not mean we cannot lower the cost of travel and make it more accessible for people.
You raised the issue of ‘protectionism’ by governments, how does that affect operators like AWA?
Governments in this region in particular tends to believe that if somebody is making money, government should also make money; that’s not what it should be. The government’s role is to create an enabling environment, to build the infrastructure and then benefit from the use of it. A government will benefit far more if they built an airport and charge reasonable fee for people to use it. More people would use it and they will recover their money back, than building an airport and charging outrageous fees so that only 10 flight a day come in and they charge each of them USD 10,000. You will make you UDS 100,000, but if you charged everybody USD1 and you had 100,000 people come in, you make the same amount of money. I think that’s where a lot of governments have a shortsighted view. Understandably the politics, it goes back to that perception that traveling is for the rich. You cut your airport taxes, everyone says, ‘they are giving tax breaks to the rich, what will the poor man going to benefit.’ The poor man will benefit far more from having lower taxes and more accessibility to travel because he can improve his quality of life through that.
These charges you talked about, are they peculiar to this market?
They are not peculiar to West Africa; everywhere in the world, you have taxes. If you go to the UK for instance, their taxes are even worst than West Africa in some cases. But West Africa disproportionately has it, Ghana and Nigeria strange enough. But if you go to Liberia or Sierra Leone, I wish they only had UDS60 and USD70 taxes. You fly round-trip between Freetown and Monrovia, my fare is USD49 round-trip, taxes are USD324 on top of that. Now, you tell me, who is making the money when a passenger travels? They don’t fly, besides it’s not safe to drive on the road; the roads are poor. They are taking boats, which are not safe. How does anyone benefit from the high taxes other than the government agency that is charging the tax?
How important is the Nigerian market to AWA?
Nigeria is our biggest market outside Ghana. Nigeria is the biggest economy is Africa and it’s right on our doorsteps; we would be foolish if we didn’t look at Nigeria as the best opportunity for us. Nigeria will continue to see growth from us; hopefully we will continue to open more gates with more flights in Nigeria. Right now, we are flying 192 times a month to Nigeria; up to five times a day to Lagos and 10 times a week to Abuja right now.
How seamless is travel in West Africa today?
Seamless travel, we are getting there. I think there are lots of good initiatives; infrastructure is everything. A lot of reason people get frustrated at boarders and airports is the small stuff; the airport is too crowded, the airconditioner is not working, the system is down, so they have to do it manually. Improving that infrasturure will give them the tool. I don’t think the government bureaucracy wants to give you bad experience, but they don’t always have the resources to get things done because of misplaced targets of where they can generate their revenue from.
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