After the collapse of Ghana Airways, I took the position that we don’t need a national carrier, and that, in fact, we can’t operate a world class airline. The Kufuor administration thought otherwise and on a wave of inexplicable optimism, decided to set up Ghana International Airlines (GIA). Almost five years on and GIA is as inefficient as its predecessor. I like to call GIA “your ‘trotro’ in the sky.” I share the sentiments expressed in the following piece in the Daily Express – that the airline should be, at least, suspended. I think the whole thing should eventually be shut down! >>>
Government has decided to appoint a Transaction Adviser to help it take a decision on what to do with the debt-ridden and badly managed Ghana International Airlines (GIA). The airline which started operations some four years ago has been nothing but a conduit for enriching an aircraft leasing entity while government continued to drain the tax payers’ money to keep the leasing entity’s books good.
The dailyEXPRESS after carefully analysing information and financial details available to it agrees with some industry watchers and calls on government to take immediate steps to suspend the operations of GIA. The suspension would not only save government as a shareholder but also save it from incurring more cost and worker agitation in the very near future.
GIA, which is supposed to be a joint venture business owned by government and a GIAL-USA consortium has been a loss making entity since it started operations, and as at today there is no indication that the quantum of loss it makes every month will reduce.
As at April 2009, the total debt of GIA was $60.8 million, out of these government gave out $47.4 million while it owes other creditors to the tune of $11.7million. GIA also owe Stanbic Bank $0.10 million and has to pay $1.60 million to SSNIT, IRS and other such statutory bodies it owes staff contributions and other taxes.
Out of the loans given out by government, $15million was from SSNIT while $32.4million was from the Ministry of Finance. I am not sure why it is been treated as a loan instead of a dash or freebie, because GIA can never raise or make enough to pay back these loans. All it has done since inception is to pile up debts and no revenue.
If you add the $4.9 million that government paid as its contribution as a share holder, it has so far wasted in excess of $52.3 million. Interestingly, the other shareholder has not spent even a tenth of this. It is no secret that out of the $2.1 million that they were supposed to have paid as their share capital, they on the blind side of the majority shareholder withdrew some $1.9 million from it for some transaction the majority shareholder is still not clear about.
With a total staff strength in excess of one hundred and sixty, usage of a single aircraft which is under wet lease, a debt situation in excess of sixty million dollars ($60m) and no clear management direction, the continuous operation of the GIA will only worsen the financial burden on government.
It is also important to point out that GIA failed even before their first flight in 2005. Go back and look at the various agreements signed prior to the commencement of operations and you will realise that there was an undertaking that the new company will only start operations after the managers secured some $55million to support the operations of the airlines. Did they?
Clearly, the business plan for GIA, if there was any, is redundant and the needed funds were not raised. This means that the Board and Management failed right from the onset to meet the goals of the airline and government would only be wasting money keeping it in operation.
A most likely question would be whether the airline cannot be saved. We on the dailyEXPRESS are of the view that with an already weak financial base, things cannot improve in anyway even if government increases its ‘help’. They have too many staff for a single-aircraft and one route operation and their liabilities are also too many. GIA is currently running a very expensive wet-lease agreement which we have learnt is mostly used as a stop-gap measure.
The leased aircraft from insider information does not also allow for large volumes of cargo business to supplement the revenue from passengers. It is also important to state that the ownership structure of the GIA Company remains murky and under what authority and basis will government continue to bail out the airline.
It is good news that government has discontinued the practice of doling out $1.5m every month to cushion GIA, money which is used to pay the leasing company and other debts. But government must go further and suspending the operations of the airline, by first stopping the sale of tickets and drawing out a plan with management to either fly out persons with tickets already or pass them over to another airline. It will be interesting to even find out what the monies that accrued from the tickets sold were used for.
At a time government is reeling under a crunch caused by both global situations and the domestic mismanagement of the economy, doling out freebies to a business that should rather be helping shore up government revenues is sickening. These GIA freebies would do a lot when passed on to our farmers even as interest free loans or used to strengthen our industries.
But why this argument to suspend operations at all, was a question posed during a conversation on this piece recently. The answer is simple. With all these debts and loose operational plans there’s nothing good in sight. If it has since 2005 and despite a ministerial directive not been able to complete its certification process, can GIA ever secure an Air Operators Certificate (AOC)?
What it simply means is that GIA is a charter business not an airline operation. They are running charter services, the type that many Ghanaians got used to, especially on the Ghana- UK route in the wake of the collapse of Ghana Airways.
They could not even continue where the defunct Ghana Airways left off, which was in line with building the Accra Airport as a regional aviation hub by developing a number of regional routes to and from Accra. Today, Slok Air, Virgin Nigeria, Aero, Air Iviore etc have taken over that business.
Once government suspends its operations, it can then take time to find out how to settle any liabilities arising and also resolve issues, if indeed there’s any with the minority shareholders.
We have been told for instance that suspension is better than liquidation because that will give government enough time to negotiate and settle creditors, passengers who are holding tickets etc.
Should government rather liquidate, all the airline’s creditors will lose their entitlements because GIA has no significant assets. And since government will surely want to have a national carrier again someday, it is important to ensure both passengers and the business community have confidence in government.
[Culled from the Daily Express… email firstname.lastname@example.org]