News that South African Airlines (SAA) looks to be homing in on Ghana as the most likely location for a secondary hub should bolster the country’s efforts to carve a niche as a regional air transport centre.
State-owned SAA has made West Africa the focus of its expansion plans, aware that the region –significantly underserved in terms of short-haul connections – offers significant potential in the form of rising passenger demand and increasing trade integration.
“We’re now focusing on Ghana as we operate on the Johannesburg-Accra sector,” SAA spokesman Tlali Tlali said in response to questions from Bloomberg News in June.
Gap in the market
The push to expand the carrier’s presence in West Africa has come on the back of additional support from the South African state. In October of last year, SAA received a $598m guarantee from the government, paving the way for the airline to add to its main hub in Johannesburg, O.R. Tambo International Airport, before the end of 2016.
The scope for expansion in the market is sizable. Currently, West Africa, which has a population of more than 300m people and includes several of Africa’s largest frontier markets – such as Nigeria, Ghana, and Côte d’Ivoire – has only limited intra-regional links.
A handful of airlines – including Nigeria’s Aero Contractors and Arik Air, and Togo’s Asky, along with the more recently-founded Air Cote d’Ivoire and Senegal Airlines – already provide connections between West Africa’s larger airports but ageing infrastructure, high landing fees, burdensome regulations, and limited maintenance facilities constrain both flight frequency and prices.
SAA had previously considered alternative options to Accra as a regional base, and previous media reports had raised the prospects of Dakar – which SAA already uses as a stopover for its direct flights to the US – as another potential West Africa base. However, Tlali stated that plans to turn Senegal into a regional hub were abandoned due to the strategy not being commercially viable.
According to South African press, SAA has also considered taking a potential equity stake in Asky as a means of entry into the regional market. However, Traoré Afsath, spokesman for the Togolese carrier – which is part owned by SAA’s Star Alliance partner Ethiopian Airlines – dismissed the takeover talk.
Africa via Europe
The attractiveness of Ghana as a secondary hub is clear. The 24m-person country has benefited from robust growth rates in recent years and has attracted record FDI inflows since the discovery of oil in 2007. Accra’s relatively low costs and stable security situation also play in its favour, and while the country does have four domestic carriers – Starbow, Africa World Airlines and Antrack along with Fly540 which recently suspended operations – it nonetheless lacks an Accra-based international flag carrier.
However, any push by SAA to expand its services and facilities there would require extensive work on Ghana’s aviation infrastructure, although the government has already begun the process of expanding capacity and upgrading the primary point of entry at Kotoka International Airport (KIA).
Figures show that traffic at KIA reached 1.7m in 2012, up from 1.6m the previous year, while domestic volumes rose from 200,000 to 500,000 over the same period. Upside expectations for growth forecast as many as 10m passengers per year by 2024.
In 2012 Ghana Airports Company (GACL) announced its need to raise $738.2m through a PPP to help develop the country’s five airports, including KIA. Under GACL’s 2008 master plan, KIA’s terminal will be expanded from 25,000 to 62,300 sq metres; taxiways will be widened from the current 27 metres to 60 metres to accommodate larger planes; baggage handling equipment will be brought in and fuel infrastructure will be improved.
On June 25, GACL started work on the $21.4m expansion of the arrival hall in Kotoka’s terminal two, which will see new equipment installed and enable the airport to accommodate rising traffic. GACL is also pushing ahead with the development of Kotoka’s terminal three. While timelines have yet to be announced, the pre-qualification process for bidders is now complete.
Crucially, in May 2013 the minister of transport, Dzifa Attivor, announced that the government had acquired 6475 ha of land in the Ningo-Prampram area in the Greater Accra region, and is undergoing a final round of feasibility studies before starting construction on a new, yet-to-be-named international airport. A budget for the project has not yet been released. The GACL hopes to expand its landholdings in Ningo-Prampram to 24,280 ha before starting construction on the greenfield project – something that would take a minimum of eight years to complete, given the lack of existing utility connections to the area.
The infrastructure expansion will undoubtedly help underpin Ghana’s attractiveness as a secondary hub for SAA, although broader regional challenges – including high landing fees – mean that any carrier looking to improve connectivity in West Africa will need to take a long-term view.