China may be capturing headlines for its investments in oil, hydro and solar resources in Africa, but one Chinese company is making a play for the continent’s airline industry.
The HNA Group, the parent company of Hainan Airlines (the fourth largest airline in China), is one of four major investors in Africa World Airlines Ltd located in Ghana. It is the first African aviation investment by a Chinese enterprise and its planes recently made their first flights in September.
Along with the HNA Group, the new airline was established with the China-Africa Development Fund, Strategic African Securities and Ghana’s Social Security and National Insurance Trust. The joint venture with $50 million in startup capital currently has two aircraft. The airline is based at Kotoca International Airport in Accra and runs 34 flights a week on three domestic routes in Ghana.
"Load factors of all the flights are around 80 percent now," said a recent statement from the HNA Group.
The carrier is eventually expected to fly several major West African cities, including Ouagadougou, Abidjan, Lagos and Abuja, but it currently does not plan to run routes to China, according to the HNA Group.
One of the driving forces behind the HNA Group’s investments is the high demand for air transport in Ghana and other parts of West Africa. In most parts of Africa, the civil aviation industry is vastly underdeveloped.
Statistics from the International Air Traffic Association show that African airlines had a solid year in 2012 with annual growth at 7.5 percent. But capacity, which reflects the planned total seat capacity airlines expect to offer, only expanded by 7.1 percent.
IATA also said in its report that Africa’s economic expansion drove up demand for flights. The economies in Sub-Saharan African countries, the region with the continent’s fastest economic growth according to the World Bank, grew by 4.9 percent in 2011.
Ghana is no exception. John Dramani Mahama, president of the Republic of Ghana, says the country’s GDP growth for the year 2012 is expected to reach above 8 percent when final estimates are completed, the Ghana Business News reported.

Projections by the Ghana Airports Co Ltd show that air passenger traffic in Ghana will hit 6 million by 2015 and the number of passengers at the Kotoka International Airport is expected to rise by 53 percent annually in 2012.
The growth in oil production off Ghana’s coast may also help the aviation industry to grow due to an expected increase in international traffic to the country.
The airline investment was one of many that Ghana attracted last year. The Ghana Investment Promotion Center recorded $5.63 billion worth in investments in 2012. China, with 16 projects in Ghana, topped the list of countries with the highest number of registered projects last year, according to the center.

Chinese investors say their investments will help Ghana develop.
"As the first civil aviation company with Chinese investment in Africa, AWA will promote civil aviation development in Ghana and for the rest of Africa," says Chen Wenli, director of the HNA Group.
Beijing encourages Chinese enterprises to invest in Africa’s agriculture, banking, environmental protection and manufacturing industries.
Chi Jianxin, president of the China-Africa Development Fund, says AWA’s investment will improve Ghana’s infrastructure and enhance its ability to develop its economy.
But several business insiders express skepticism about AWA’s ability to reap commercial success.
"It is difficult to make profit just from the Africa civil aviation market because of the underdevelopment of air traffic in Africa," says Li Lei, an aviation analyst at CITIC Securities Co Ltd, an investment bank in China.
The average load factor among African airlines in 2012 improved to 67.1 percent, though that figure was the weakest among all regions in the world, IATA said in its report.
To be successful, the new airline must compete against four other domestic airlines in Ghana. It must also pay more attention to safety. Africa has the worst accident rate in the world, according to the IATA.
Chinese investors say they are aware of this problem.
"The HNA Group’s investment went through careful consideration and the experience of the project can be used for the group’s other investments and businesses in Africa in the future," the group says.
The airline, hotel and property group operates 28 business entities overseas with almost 4,000 foreign employees. Its overseas assets amounted to 75 billion yuan in 2012, occupying 21 percent of the group’s total assets. In the next five to 10 years, the group expects that percentage to jump to 30-40 percent.
The objective of this investment is to expand the group’s other business segments, some analysts said.
"AWA is just the first step for the HNA Group to develop in Africa," Li Lei says.
The group makes no secret of its ambitions. Li says investing in AWA opens up investment paths to other businesses, such as hotels and real estates.
"The group does not exclude developing other businesses in Africa, if there are opportunities," the group says. "But the group is focused on AWA right now."
SOURCE: China Daily
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