Economist Professor Peter Quartey has attributed Ghana’s high domestic airfares to a combination of taxes, fuel costs, the small size of the market and the high cost of capital.

His comments come amid concerns over the cost of domestic air travel, with passengers often comparing Ghana’s fares with those in other countries.

Speaking on Joy News’ PM Express Business Edition on Thursday, Prof Quartey said the high cost of doing business in Ghana extends beyond the aviation industry.

“Well, we are not just It’s not just limited to the airline industry. If you look at our hotels, you'll see they're expensive. If you look at other things, rent, etc., we tend to be quite expensive,” he said.

He said Ghana’s domestic aviation market is also smaller than that of countries such as Nigeria.

“Our market is not as huge as you would find in Nigeria,” he said.

According to him, Nigeria’s larger population and heavier traffic allow airlines to operate more aircraft and compete for a bigger market.

“In our case, we are paying more because our market is a bit smaller than all these other countries,” Prof Quartey said.

He also cited lower income levels as another factor limiting demand for domestic air travel.

“Most people will use road transport, trotro or buses, rather than to fly,” he said.

Prof Quartey further pointed to the length of time some major African airlines have operated as another factor affecting their costs.

“You find Ethiopian Airlines, for instance, has been in this business for a very long time; Kenya Airways has been in business for a very long time, so their domestic flights, even international flights, tend to be a bit cheaper than ours,” he said.

However, he placed particular emphasis on Ghana’s tax environment.

“Then you look at the tax environment, and we keep stressing this,” he said.

“So we are taxing, overtaxing the industry.”

Prof Quartey said the tax burden ultimately gets transferred to passengers.

“And certainly, as a business person, they will pass it on to the consumer, pass it on to us to pay,” he said.

He also identified borrowing costs and aviation fuel as significant contributors to airline operating expenses.

“I know some of these airlines have borrowed, I mean they have loans that they are servicing, and they have to pay,” he said.

“Even, let’s talk about aviation fuel. Fuel accounts for about 30% of their cost.”

He said higher fuel costs would consequently translate into higher airfares.

“What we should be doing going forward is to develop the industry,” Prof Quartey said.

He argued that expanding the market and creating a more favourable business environment would attract additional operators.

“You can’t force, you know. Once there is the market, once the environment is good, once it’s profitable, every investor, businessman would like to invest in a profitable business,” he said.

“But if the market is not as huge, if we haven’t developed the market and it’s so small, and then the very few who ply that route will be charging enough to cover their cost of operations.”