New national airline for Uganda?

PRESIDENT MUSEVENI TELLS HIS NEW CABINET THAT A NEW AIRLINE IS NEEDED

(Posted 24th June 2016)

President Museveni, when addressing the first cabinet meeting of his new government, reportedly told them that ‘because our brothers in Ethiopia, Kenya and South Africa let us down‘ the formation of a national airline was now a priority.
When the former Uganda Airlines was finally dissolved it was because the carrier was broke and had been stripped of its cash cows like a ground handling monopoly, handed to a local consortium while the other profit making arm, the ownership of the local Galileo franchise, too eventually went into private hands.
No investors could be found at the time, as suitors swiftly discovered that all they would get was a debt ridden empty shell with no aircraft and few other assets.
Years later came the Aga Khan Fund for Economic Development, set up Air Uganda and was after seven years of operations nearing break even point, when the Ugandan Civil Aviation Authority killed them off, as amply explained here at the time. That in fact happened at a time when the Ugandan government had the offer on the table to invest into the airline and turn it into a quasi if not real national carrier. While government pondered the offer did the Uganda CAA do their dirty work however and – allegedly to escape ICAO sanctions – pulled the international AOC’s of all Uganda registered airlines, at one stage citing safety concerns. This however was swiftly dismissed as a fairy tale and smoke screen as domestic operations by some of the affected airlines like the Aero Club in Entebbe, Ndege Juu in Kajjansi and of Eagle Air from Entebbe were allowed to continue even though they could not fly across the national borders.
Over 230 highly qualified employees of Air Uganda lost their jobs and connections to Nairobi, Juba, Kigali, Bujumbura, Dar es Salaam, Kilimanjaro, Mombasa and Mogadishu literally vanished overnight leading to a scramble for seats and substantially higher fares.
While eventually then RwandAir and Ethiopian were given fifth freedom traffic rights to fly out of Entebbe, to Juba first and then, in the case of RwandAir, to Nairobi, were most other former U7 routes no longer available on direct flights and needed transit elsewhere.
A former Air Uganda employee in fact, when discussing the development last night, promptly responded, on condition of anonymity: ‘Unless those responsible at UCAA for the Air Uganda closure are retired or sacked and a new team installed, what will change. Who will guarantee a new investor that they will not pull the same stunts all over again if they are faced with a potential ICAO audit failure like it was the case when they shut down U7‘.
Airline sources reached in the short time also denied that there have been ‘failures‘ on the part of regional airlines flying to and from Entebbe in regard of fares, but that for one it was the market vis a vis supply and demand of seats which led to pricing and perhaps the lack of incentives by the Ugandan authorities to make flying in and out of Entebbe cheaper.
Others pointed to the challenges even established airlines in the region were faced with, such as Air Tanzania or Kenya Airways, and that an upstart would find it very difficult to capture traffic on especially international routes, where the likes of Emirates, Qatar Airways, Etihad, Fly Dubai from the Gulf and Brussels Airlines and KLM from Europe offered both competitive fares and state of the art equipment, infrastructure and global connectivity, a national airline would find impossible to match.
One other aviation source then added yet more salt when pointing out that under the NCIP – short for Northern Corridor Integration Projects – an aviation deal was reached that member countries like Uganda and South Sudan without a national airline, would let those with well developed national carriers operate routes out of Entebbe on fifth freedom rights.
Towards that end is RwandAir increasing their fleet from the present 8 to 12 aircraft by the middle of next year, offering a wider range of connections for Ugandan travelers either directly out of Entebbe or via Kigali.
Insider information suggests that a group of international aviation investors is considering the setting up of a new airline based in Entebbe, but given the trend of rising crude oil prices, the cost of new aircraft – the airline would need both short / medium haul and long haul equipment to face the competition – and the globally emerging lack of pilots meeting the required standards, this will be a mammoth task to accomplish.
‘Unless a new airline starts pole pole with say two or three aircraft for short regional routes, the initial losses would be staggering. They would need an approach like Air Uganda started up, building market share on key regional routes before branching out and gradually adding more. Even then must an investor have deep pockets to sustain the initial losses for as much as two years, hoping the world economy will not throw tantrums and that the East African region is remaining stable and the money is found for all the infrastructure projects presently under planning. Look at RwandAir how they patiently over many years now built their brand and route network. That takes time and money. The Rwandan government is fully behind their airline, but given our budget challenges and priorities like Health, Education and infrastructure, how much can Uganda squeeze out from the annual budget to support such a venture until it matures and breaks even‘
Many questions indeed and certainly fodder for thought, giving airlines already on the route enough time to plan their market strategies in the event this becomes reality, of how best to compete using their networks, known brands, ability to adjust fares into and out of Entebbe and importantly, their frequent flyer programmes which give direct incentives and benefits to their loyal passengers.
Watch this space for regular and breaking news from Eastern Africa’s aviation scene.