This is why Ghana Airways went bankrupt in 2004

In the year 2000, Ghana Airways offered flights between Accra and Baltimore, Maryland, but it was liquidated and collapsed in 2004.

The collapse was attributed to the high debt situation, management and operational problems.

Read the full story originally published on May 9, 2023 at www.ghanaweb.com.

In 1958, Ghana Airways entered the scene to serve as Ghana’s national airline. The aircraft was a joint venture between the government of Ghana, which owned a 60 percent stake, and the British Overseas Aircraft Corporation (BOAC), which owned the remainder of the 40 percent.

It operated from its primary hub at Kotoka International Airport.

According to simpleflying.com, Ghana Airways had a seven-year agreement with BOAC staff who first operated the airline, while some of the Ghanaian staff were sent to London for training.

Over the years, Ghana Airways flew the flag of Ghana on its wings and anyone associated with this flying experience was considered elite and often beamed with some pride.

Ghana Airways used two Boeing 707-420s and three Vickers VC10s to launch flights to the United States, along with services to Sydney in Australia and Tokyo in Japan.

But the business side of things started to ring alarm bells, resulting in the subsequent collapse of Ghana Airways for various reasons.

In the early 2000s, Ghana Airways’ financial problems became apparent as demand for flying increased and the airline’s workforce became massive. The aircraft also found it difficult to compete with other private airlines that used innovative ways of operating.

GhanaWeb Business investigates the key reasons why Ghana Airways failed to meet expectations.

Management and operational issues

After operating successfully for a few years, Ghana Airways decided to step away and become an independent entity by entering into an agreement with BOAC to buy out its 40 percent stake in the airline.

While the move was commendable, the company’s management now faced stiff competition from private airlines, which started providing better services compared to Ghana Airways.

When former Chief Executive Officer of BOAC, Sir Duncan Cumming, was presented with a check for the agreement, he simultaneously signed a contract to extend BOAC’s management agreement, which was first signed in 1958.

This agreement would be in effect until July 1961 after the government of Ghana announced that it was reorganizing the airline and canceled Ghana Airways’ commitment for the two Boeing 707 aircraft it used for operations under BOAC management .

But about three years before the contract expired, Ghana Airways management is said to have canceled the pool agreement with BOAC and instead signed a new agreement with Alitalia to collaborate on flights between Accra and Rome.

However, this did not sit well with BOAC, resulting in frosty working relations between the British airline and Ghana Airways, although the British company remained the handler for Ghana Airways’ ground operations at London’s Heathrow Airport.

Debt situation of Ghana Airways

According to simpleflying.com, Ghana Airways became heavily saddled with debt over the years, amounting to around $160 million, with its former chairman, Sir Sam Jonah, indicating that the company would not survive without a foreign partner.

Before its collapse in 2004, Ghana Airways was able to offer flights between Accra and Baltimore, Maryland in the year 2000, and the following year it decided to operate flights via transit in Banjul, Gambia, as part of efforts to expand its reach. and meet demand.

But the strategy backfired when passengers in Banjul threatened to set fire to the Ghana Airways office after a packed flight from Accra landed in Banjul in January 2002, loaded fuel and then headed to Baltimore, killing Gambian passengers hoping to fly to Baltimore were left behind at the airport.

That same year, Ghana Airways saw one of its DC-10s airlines seized at London’s Heathrow Airport after its British creditor, BOAC, obtained a legal nod to recover part of the £4 million owed to the company to be reclaimed.

However, the British creditor released the DC-10s aircraft after receiving a debt payment of $1 million, just an amount of Ghana Airways’ debt obligation to the British company.

In September 2002, the impending collapse of Ghana Airways was almost an open secret after the government of Ghana announced that it had entered into an agreement with South Africa’s Nationwide Airlines, adding that Ghana Airways would now be renamed Ghana Nationwide International Airlines (GNIA).

Although this agreement and relationship with the South African company lasted less than a year, in 2003 the government of Ghana said it had withdrawn from the deal with GNIA and was now involved with another company called British Midland.

Under this new deal, Fly Ghana Limited was named as the government’s major shareholder. It was expected to operate under a separate entity alongside Ghana Airways for a short period before the two parties formed the new Ghana Airways franchise.

Under this plan, British Midland would supply two Airbus A330s for the Accra-London and Accra-New York routes, with the DC-10s being used on other long-haul international routes, while the new Ghana Airways would operate regional flights on the Fokker. 100s of aviation fleet.

Finally, in 2004, the inevitable happened after it was discovered that the new Ghana Airways was operating under the pretext of an unsafe aircraft with an outdated license.

This resulted in the US Department of Transportation banning the airline, forcing it to cancel its flights to New York and Baltimore.

However, the ban imposed on Ghana Airways led to the entire board being dismissed by the government of Ghana, with the state taking full control of the airline, which was still left with more outstanding debt and operational problems.

As part of efforts to revamp the airline, Ethiopian Airlines had offered to keep Ghana Airways afloat, but proposed a deal that would see the government take a 25 percent stake in the airline.

The government of Ghana subsequently refused the proposal, forcing the airline to be liquidated in mid-June 2005.