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Friday, March 26, 2010

How Kufuor and Anane Doomed Ghana Airways

Source: The Enquirer

A comprehensive document in the possession of The Enquirer points to the fact that the bane of the Ghana International Airline (GIA), in the current ugly situation, is attributed to the haphazard manner the new Patriotic Party (NPP) government handled the liquidation and sale of the national airline, Ghana Airways, in 2005.

The government at the time engaged the services of PriceWaterhouseCoopers in 2004 to design a business plan for the liquidation of Ghana Airways, but it did not go by the plan, which, insiders say, was the best for the sale of the airline.

According to the PriceWaterhouseCoopers’ plan, dated April 22, 2004, submitted to the then Minister of Road and Transport, Dr Richard Anane, after the liquidation of Ghana Airways, the new one that will be in operation should be a privately owned, and will be funded by a total opening investment of $55 million, consisting of $25 million cash equity and $30million of debt.

Interestingly, the GIA, which the NPP government gave out Ghana Airways to, brought in only $2.1million towards the takeover of the national airline.

Even with that token sum, the GIA, under strange circumstances, withdrew $1.9 from its account and paid it to Sentry Financial Corporation, the company that provided the initial capital on behalf of GIA USA LLC.

The move, which took place on June 27, 2005 was concealed from the Government of Ghana for two clear weeks before it camp up for discussion at a board meeting.

The plan that was designed by PriceWaterhouseCoopers made it clear that the Government of Ghana was by the minority shareholder of the airline that would be established.

Unfortunately, that advice too was simply thrown to the dogs, as the government, in clear contravention, became the majority shareholder in GIA, with a 70 per cent share.

Again, the government provided an amount of $4.9 million, as against what was stated in the plan that the GIA should provide all the financial needs for the new business. The plan created room for absorption of 500 employees of the defunct Ghana Airways, but that was not to be.

Currently, pilots of Ghana Airways that were trained to handle Boeing aircraft are idle, because of the wet lease agreement between the GIA and Astraeus Airlines.

The plan by PriceWaterhouseCoopers stated clearly that contract between the Government of Ghana and GIA should be based on strict performance measures that would ensure that the new company was bound to perform.

In addition to that, the contract was to specify the potential remedies due to the Government of Ghana should the company fail as a result of lack of proper management of matters within its control. Surprisingly, GIA presently is performing badly and it is choking with huge debt.

As at April this year, the airline was indebted to the government and other creditors to the tune of $60.8million.

The currently National Democratic Congress (NDC) has so far supported the airline with $3million, covering January and February, this year. The government, presently, finds the operation of the airline unprofitable and has therefore suspended the subsidy and is taking steps to evaluate the airline’s operations since the financial support is unsustainable.

Before the NDC took over the reins of government, funds that were made available to GIA by the government, usually on a monthly basis, were treated as loans, but there were no written agreements between GIA and the government.As a result, there is no evidence that the loan-related costs reflected in the GIA accounts.

The GIAL was formed in 2005, with the government of Ghana having 70 per cent shares while the 30 per cent went to GIA-USA. Managing of the company was however ceded to the minority shareholder under a signed agreement.

It started operations in October 2005, with a singly wet-leased aircraft on the Accra-London route, but the government at the time dismissed the minority appointed Chief Executive Officer on April 7, 2006, resulting in the minority refusing to take further part in the management of the company.

GIA-USA, the minority shareholders, took the matter to the International Court of Justice at The Hague in the Netherlands and the case has become a legal quagmire as of date.

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