Ghana Airways is going under. (Ghana).

Ghana's flag carrier, Ghana Airways (Ghanair) is on the brink of collapse. It is saddled with debts totalling $127m. In the face of the airline's sole owner, the Ghana government's failure to rescue it from its financial turbulence, or any private investor stepping forward, Ghanair is surely set to go under.

Ghanair board chairman, Sam Jonah, also the chief executive of the mining giant Ashanti Gold-fields, disclosed at a press briefing in mid-June that the airline owed $64.9m to its key trade creditors, almost all overdue.

The creditors include the IATA clearing house ($7.365m); AJ Walters of the UK, specialised in aircraft spares ($3.986m); Alitalia, specialised in DC-10 maintenance ($6.175m); Atitec, specialised in DC-9 maintenance ($1.7m); ASECNA ($2.053m); SkyJet ($3.474m); and the JFK International Air Terminal ($396,000).

Jonah said: "There aren't any soft options. Any day, any of the creditors can bring this down. Let's nor kid ourselves, everyday the airline takes off, the debt deepens."

The board, which was appointed last year, also inherited foreign and local loans to the tune of $62.5m under the previous management (under Rawlings), for which some of Ghanair's assets were pledged against.

At the local level, the airline owes the Consolidated Discount House (CDH) $1.25m that should have been paid in January last year at a rare of 34-56%.

It owes another finance house, Fidelity, $2.625m at 49% and the due date was September last year, while it is indebted to the Ghana Commercial Bank to the tune of $375,000, also at a rate of 42%.

On assets pledged against the loans, Jonah said Ghanair had used its subsidiary, the Airways Catering Limited, and its holding in the four-star Novotel Hotel in Accra as collateral against the CDH loans.

Ghanair has also used its DC-9 aircraft to guarantee a $7m loan from the Ghana Ports and Harbours Authority (GHAPOHA), while the head office building and its residential estates in the Accra surbub of Kisseman have been respectively pledged for the GCB loan and another loan contracted at Merbank, another finance house in Accra.

Jonah explained: "With five aircraft and 1,407 staff, Ghanair has a high staff-aircraft ratio of 282, compared to 199 at Dutch carrier KLM and 167 at British Airways."

The 11 September attacks in America and its impact on air travel had also caused the airline to lose 40% of passengers on the American route, together with 40% drop in revenues while tax insurance had gone up 17%.

This, however, cannot be a major cause of Ghanair's financial mess, since African airlines were largely immune to the fall-out from September 11 due to their relatively small exposure to the US market.

Old problem

The airline has been experiencing operational losses for two years, if not more. The losses can be attributed to the poor organisational culture within the airline. They range from corrupt practices, unauthorised discounted tickets, abuse of official privilege, weakness of customer service orientation and limited maintenance facilities for aircraft, among others.

Ghanair was, until recently, the dominant carrier in West Africa with schedules to nearly all the West African capitals, but has been compelled to reduce or cancel some of its routes.

It has cancelled its three times daily flight to Abidjan (Cote d'Ivoire), and daily flights to Dakar (Senegal), making room for Ethiopian Airlines to ply those routes. The code-sharing between the two carriers has also been suspended due to financial reasons.

The airline, which is the only one in West Africa with an international AAA rating, has reduced its international routes, namely London, New York and Washington and all other European destinations to once a week, to the advantage of other major African airlines.

A forensic audit of the company's affairs, ordered by the government, is almost completed, but it is uncertain if the authorities will use the nation's scarce resources to bail it out.

Dr Akoto Osei, special adviser to the finance minister, was quoted by the state-owned Daily Graphic newspaper as saying: "The debt is huge and the government might nor be able to provide that much."

Meanwhile, the board and management are waiting for the government's decision on a proposal for a partnership with a private organization. According to Jonah, the board has submitted its recommendation on two foreign companies, T&E of Lebanon and Triathon of Switzerland.

Both companies have committed themselves to providing Ghana Airways with five aircraft to run the airline's routes, pay royalties and share profits.

Jonah cautioned that if the government did nor want a tie-up with another carrier, it would need to recapitalise the company or convert an $80m government-backed loan into equity.

"Then we could perhaps go to a bank and see if they can match it with another loan," he said.

Until a firm decision is reached soon, Ghana Airways, established soon after independence 45 years ago, moves closer and closer to the brink of collapse.