Our suspension in Accra is not due to fuel hikes – Virgin Atlantic

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Last week, news broke that Virgin Atlantic, a trading name of Virgin Atlantic Airways Limited, is suspending its operations between Accra and London with effect from September 23.

This generated a lot of debate as to why one of the prominent carriers in the country is pulling out and the implications for the country?s aviation sector.

The airline, in a release issued on June 6, attributed the decision to what it calls ?exceptionally high fuel costs in Ghana, a challenging wider economic environment, and an inability to operate morning arrivals from Accra due to scarcity of slots at Heathrow.?

?We have had to take the difficult decision to suspend our services between London and Accra. We were excited to enter the market and have been pleased to be part of the growth and development taking place in the country,? Virgin?s Director of Airline Planning Edmond Rose is quoted as saying in the release.

High cost of ATK

The airline cited the high cost of Aviation Turbine Kerosene (ATK)/aviation fuel as one of the main reasons why it was pulling out. This indeed came as no surprise to me as the airline has been singing the same song in other places on the continent that it has had to pull out of.

The airline cited ?rising fuel cost? as the chief reason for suspending its Nairobi London flights last year — interestingly, on the same day the airline plans to halt its Accra-London operations, i.e. September 23.

However, an analysis of the current ATK prizes within the sub-region clearly indicates that Ghana?s ATK price is not the highest in the sub-region; not that would force a carrier out. Currently, aviation fuel costs US$0.95 per litre in Nigeria; US$1.07 per litre in Ghana; and US$1.09 per litre in Cote d?Ivoire.

An analysis of the average of aviation fuel per region, put together by the International Air Transport Association (IATA), points to the fact that the global average price paid at the refinery for aviation jet fuel in Africa and the Middle East region is the lowest — bar the North America region.

From the above, it is clear that the decision by Virgin to exit the Ghanaian market cannot be pinned on the high cost of aviation fuel. It?s a non-starter. Other leading carriers including British Airways, KLM, Emirates and Air France continue to offer services between Accra and London through their respective hubs — in the case of BA from Accra-London direct for decades.

It is worth noting that these carriers — British Airways, KLM, Emirates and Air France — still operated flights to and from Nairobi when Virgin was in operation there, and still do.

?A challenging wider economic environment?

The Richard Branson-led airline further cited ?a challenging wider economic environment? as part of their ?further and better particulars? for pulling out of Accra — though the country?s Gross Domestic Product (GDP) growth of 7.9 percent achieved last year, admittedly, was slower than the 14.4 percent achieved in 2011.

 In a challenging global economic climate that has seen hitherto major economic players now recording marginal growth over a given period, the country?s economy is seen as one of the fastest-growing on the continent and in the world.

Ghana?s economic advancement — spurred on by the discovery and production of oil in commercial quantities, a booming service industry, and the relatively stable world market price of the gold and cocoa, two major exports from Ghana — has seen the bourgeoning of a middle-class with deep pockets and high purchasing power.

A rise in the demand for residential property has led to a boom in the construction industry and coming-in of world-renowned business entities including hotels, food chains, electronic manufacturers and airlines seeking to hold down a starring role in the Accra aviation game.

Information I gathered from reliable sources indicate that the British Government, so to say, is seeking more slots to Accra for its operators. Why would the UK Government be seeking more slots to Accra if the economic climate is cloudy?

Clearly, there are enormous opportunities in the aviation sector in the country if an airline gets all its ingredients right. There are pending applications to the industry regulator, the GCAA, for a code-share arrangement between various airlines who have seen the industry?s potential.

Virgin is incurring huge losses on the Accra-London route and it only makes business sense for the company to deploy its aircraft to routes that are ?financially viable?; but this, again, shouldn?t be viewed through the lenses of a challenging economic environment in the country.

Scarcity of slots at Heathrow–the more reason why Virgin is leaving

Indeed, the ability of airlines to attract first- and business-class passengers is crucial to its profitability, and Virgin is no exception. You need the big spenders ? business- and first-class passengers; it doesn?t matter if you are able to fill all your economy class seats on such a route as Accra-London.

Ordinarily, these groups of passengers travel from Accra in the evening and arrive at Heathrow the next morning. Unfortunately, as Edmond Rose, Virgin?s Director of Airline Planning admits: ?scarcity of slots at the UK?s international hub airport, London Heathrow, has meant that we have been unable to offer morning arrivals into London, which makes us a less attractive option for the business traveller.?

What is there to add? If the UK Government?s refusal to increase the airline?s slot at Heathrow airport has meant the airline cannot make as much on the Accra-London route; should there be a hue and cry and finger-pointing if they have decided to leave?

The lack of slots at Heathrow ?has also limited our ability to offer connections onto our wider transatlantic network,? Mr. Rose rightly acknowledged.     

Virgin needed slots at Heathrow to attract the ?big spenders?, some of which are always on the look-out for how easy or otherwise it is to connect from one destination to the other. Early morning is the peak arrival time at London?s Heathrow and there are 100s — if not 1000s — of connecting flights from Heathrow. Since the airline doesn?t offer morning arrivals into London, it becomes just another option to business- and first-class passengers flying into London from Accra. Period!

The airline?s other base, Gatwick, also offers no surfeit of onward connections. That has meant Virgin losing out on the Accra-London route to its rival and fellow UK carrier British Airways, and other European carriers operating in the country.

Some industry observers contend that the airline?s pull-out may be due to its ongoing activities to streamline its operations after the acquisition of a 49% stake in Virgin Atlantic by Delta Airlines. Virgin Group founder Richard Branson continues as majority shareholder with a 51% stake in the airline.

Why we need not worry

There are currently about 40 airlines servicing the Kotoka International Airport (KIA). RwandAir, the flag-carrier of Rwanda, started operations in the country barely two weeks ago. Pison Airways, another regional and international operator — with a Ghanaian playing a lead role, will soon commence operations.

Other regional and international carriers are undergoing a certification process by the GCAA to operate passenger and cargo airlines into the country.

It is heart-warming to note that our own domestic operators have regional and international aspirations which they are working hard to achieve.

Most importantly, there exists a cordial working relationship between the UK?s Government and aviation regulator and Ghana?s Government and the GCAA — our industry regulator.

Adios Virgin, as you bring down the curtains on you operations in Ghana and strengthen your operations in Nigeria and South Africa. We will miss your nice on-board services … .but not for long!

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