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26.03.2009 Business & Finance

GIA is ailing but future is bright

GIA is ailing but future is bright

The Ghana International Airlines (GIA) has presented fresh proposals to the government to help resuscitate the ailing national airline, which has a debt stock of $59.36 million.

Among the proposals, which are with the Attorney-General's Department, are the immediate resolution of the dispute between its shareholders, capital restructuring, the injection of a substantial amount of fresh capital and the use of own aircraft.

The acting Chief Executive Officer (CEO) of the GIA, Mrs Gifty Annan-Myers, dilating on the debt the company owed since it became operational in November 2004 in an interview, rather painted a bright future of the airline.

To keep the airline's head above water, the government has been digging deep into its purse to support the ailing carrier with a whopping $1.5 million every month.

But Mrs Annan-Myers, showing optimism, was of the view that "a key growth strategy in the industry presently is the formation of alliances and co-operation with other airlines".

She said in order to enhance its capacity to offer profitable and competitive air transportation, the company needed to join alliances and co-operate with other airlines to carry out its planned programmes and activities.

She said the company had the potential to grow to become a highly successful airline, considering its location, patriotic market and safety record.

"Growing an airline, however, requires a massive capital outlay to which the shareholders must commit to inject substantial fresh capital or invite other investors to join them," she said.

Mrs Annan-Myers said the company had tried over the years to go through certification with the view to procuring an Air Operators Certificate (AOC) but added that that could not materialize due to financial challenges.

"Consequently, the company operates on the hack of an air carrier authorization certificate which it has been procuring from the Ghana Civil Aviation Authority (GCAA) from time to time," she said.

According to her, in 2008 the company was approached by several potential investors, six of which were forwarded to the Ministry of Finance and Economic Planning for due diligence to be done on them, saying that two proposals put forward by the investors were the demand for sovereign guarantee and a stake in the equity of the company.

She said the key to unlocking the success of the company was how quickly the dispute between the shareholders was resolved, urging both sides of the company to take a second look at its well-being and seek an alternative resolution mechanism which was faster and cheaper.

In November 2004, the government of Ghana, in joint partnership with an American consortium, incorporated GIA as a national carrier to replace Ghana Airways Limited, which was in liquidation,

The intent was to have a private sector-led national airline which was seen as a panacea for the establishment of an efficient safe, well resourced and profitable airline.

The shareholding structure is 70 per cent (US$4.9 million) for the Government of Ghana and 30 per cent (US$2.1 million) for GIA-USA LLC.

The management of the company was, however, ceded to GIA-USA LLC per the shareholders' agreement signed between both parties.

Documents at the defunct Ministry of Aviation made available to the Daily Graphic revealed that the losses were mainly due to under-capitalisation, the use of a single aircraft, operating on one route and the high cost of wet leasing aircraft.

According to the documents, wet leases were very expensive and were only employed as a stop-gap measure in the industry, noting that the airline, unfortunately, continued to use wet lease for its operations.

They said procurement lapses during the initial stages also contributed to the significant losses suffered by the company, adding that "most of the contracts that were signed were not in the best interest of the GIA".

"Furthermore, the narrow-bodied B757-200 aircraft which was initially used for more than a year and is presently back in use has limited Space for cargo, which serves as a supplementary source of revenue," the documents said.

They said GIA's competitors on the route had been using wide-bodied aircraft that had more passenger appeal and capacity.