GHANA AIRWAYS HAS NEW AMERICAN PARTNER

UNCLAS ACCRA 001786

SIPDIS

SENSITIVE

DEPARTMENT FOR EB/TRA/OTP -- BIRIGITTA MATTINGLEY
DEPARTMENT PASS TO DOT AND FAA

E.O. 12958: N/A
TAGS: EAIR GH
SUBJECT: GHANA AIRWAYS HAS NEW AMERICAN PARTNER



1. (SBU) SUMMARY: The GoG appears to have made a bold move to
save Ghana Airways. Minister of Roads and Transport Richard
Anane told EconOffs the GoG will sell a portion of Ghana
Airways to a group of American investors headed by SkyWest
founder and board member Ralph Atkin, known as Ghana
International Airways (GIA). The Minister did not address
the future of the airlines oft criticized employees. Ghana
International Airways claimed a week ago that all employees
would have to be sacked as a pre-condition of the deal. END
SUMMARY.


2. (SBU) EconChief and Econoff spoke with Roads and Transport
Minister Anane about the conflicting stories surrounding a
deal between GIA and the GoG for Ghana Airways. According to
the Minister, GIA officials, including SkyWest founder Ralph
Atkin met with President Kufuor and his cabinet Saturday,
August 21, to hammer out a deal. The Minister confirmed that
local media reports of a deal were accurate. The details
outlined in the press reports track almost word-for-word with
what a GIA representative told Econoff last week.


3. (U) According to all sources GIA will hold a 30 percent
stake in the new Ghana Airways while the GoG retains 70
percent. The Minister stated that GIA would be given a "free
hand" to operate the airline for 90 days. To affect this the
GoG will assume the airline's 162-million-dollar debt and not
intervene in the management of the company for 90 days. GIA
is expected to reorganize and lease new equipment during that
time. To cover operating costs during this time of
"exclusivity" GIA and the GoG will put up USD 2.1 and USD 4.9
million in cash, or 30 and 70 percent of USD 7 million,
respectively.


4. (SBU) At the end of 90 days GIA is expected to inject an
additional USD 55 million into the airline. The report makes
no mention of any additional investment by the GoG. However,
GIA's representative said that the GoG would contribute about
the same amount at the end of 90 days.


5. (SBU) Ghana International Airways' representative was
emphatic that GIA would maintain full control as the GoG's
interest in the company is reduced to 10 percent of total
shares over the next five years. The media and the Minister,
however, were silent on this issue, although the Minister
agreed the GoG's long term plan was to float its shares on
the Ghana Stock Exchange.


6. (SBU) Last week GIA's primary concern (aside from the
outstanding debt) was the current 1700-person workforce.
Ghana International Airways indicated there would be no deal
if the GoG did not fire every employee. The Minister claims
that some cuts will be made before GIA takes over to "show
good faith" and prevent GIA from "looking like the bad guy".
He did not, however, indicate that the cuts would be drastic.
It is unlikely that GIA would have dropped this position
completely since it was a cornerstone of its plan to move
forward with nothing more than Ghana Airways' name and some
exclusive routes.


6. (SBU) The big question is this: Who controls Ghana
Airways at the end of 90 days? Time and again Ghana Airways'
problems have been blamed on political meddling and outright
cronyism, with good reason. The GoG has proved repeatedly
over the last few years that it is incapable or unwilling to
undertake the necessary but politically difficult steps to
restructure Ghana Airways. GIA has no intention of entering
any deal that allows any such interference, but whether they
can come up with an agreement that will keep those with
political interests at bay remains to be seen. In terms of
attracting passengers, reliable, safe service may be no
substitute for the super-sized luggage allowances and
back-door freebies that Ghana Airways has provided for
personal and political friends. West Africa's only direct
routes to the U.S. are a prize that will be cumbersome if it
brings the rest of Ghana Airways' considerable baggage.
YATES