STROKING THE NATIONAL EGO WITH A NATIONAL AIRLINE
As Kenya Airways launched their long awaited new share rights issue last Friday the offer is active on the financial markets between April 02 and 27 it became evident once more that The Pride of Africa has since its initial privatization in 1996 established itself as an African aviation force to be reckoned with and now has ownership from across the region. Their shares trade not only at the Nairobi Stock Exchange but also at the Uganda Securities Exchange and the Dar es Salaam Stock Exchange, with Kigali on the horizon it is understood.
As THE regional airline it connects East Africa like no other in part due to the close partnership with Tanzanias Precision Air, and many institutional and private investors from across the East African Community own shares. So does the Kenyan government by the way, holding 26 percent of the share capital.
The success story of the Pride of Africa has however also bred envy and of late taken on grotesque forms, with misguided politicians in the region calling for the return to the command economies of the 70s by forming national airlines. In the case of Tanzania it is a bottomless pit called Air Tanzania Corporation Limited, which gobbles up resources faster than the ink dries on the cheques written by government. With one single aircraft operational, and again only courtesy of government paying for the heavy maintenance the Bombardier Q 300 underwent in South Africa to pre-empt the plane from being auctioned to recover the outstanding dues for the MRO, ATCL is a mere shadow of what once used to be Air Tanzania, which covered the country and the region. Since then has Precision Air come up and turned into the predominant carrier of Tanzania, flying the flag across the sprawling country with more domestic destination than any other airline before them operated to and into the wider region.
Much was said here in the past over the way the Tanzanian government is lukewarm at best and hostile at worst to such private investment incidentally echoed by leading economic professors speaking at an economic forum last week in Dar es Salaam, when they told amongst others President Kikwete that the time is now to embrace economic change and their missed opportunity to emulate the way Kenya and Kenya Airways went along since 1996.
Precision Air had an IPO, well undersubscribed with the just over 43 percent of the shares sold late last year, and here the Tanzanian government could have made a point, to embrace the company and acquire a significant share portion of either under 25 percent or over 25 percent even, to make the airline a quasi national airline. Instead of making a sound investment, sure to pay dividends in years to come, they opted to discard the consideration of value for money and keep pouring money into ATCL, alongside depriving the nation of greater funding for the health and education sectors.
Move on to Uganda, where in recent weeks talk of reviving Uganda Airlines has emerged, causing some very controversial exchanges between those in the know of the subject and those peddling the idea as the new chapter of the bible, well almost anyway. Uganda Airlines attempted privatization ended with the company being put into liquidation in 2001, when vested interests, if not outright greed, combined with a serious lack of understanding how aviation works, drove away suitors like South African Airways, British Airways and others.
Now, over a decade down the line, and having seen repeated failed upstarts like in privately owned East African Airlines, followed by Victoria International Airlines in which notably government had invested against all advice at the time, sections in government seem hellbent to try it once again. The investment in VIA written off, and having caused egg all over the faces of the various promoters and backers, it seems that the already empty coffers of government may find that more mega bucks will be asked for by people with cloud nine ambitions, without fully appreciating how complex and complicated the airline business really is. Leave alone that there is need for greater budgets in Uganda too for education, health and social services, there is likely not nearly enough money to create a new national airline and attract the industrys brightest to run it, give it the planes to match say RwandAir and find the economic environment conducive for long term survival.
In 2007 did the Aga Khan Fund for Economic Development launch Air Uganda, which has since stabilized following initially poor choices for aircraft made by hapless managers, until their powers that be finally realized that smaller jets were needed to create financial sustainability. That, by the looks of it, has now been accomplished under the immediate past CEO Hugh Fraser and now under Kayle Haywood, the two of them setting the airline on a cautious expansion course with more frequencies and more destinations. It is a fact that AKFED has given the Ugandan government the option to buy into the airline and become a partners, and future plans in line with AKFEDs general policy of seeking broader shareholdings when their investments have matured include an IPO as and when the company is ready to do so. AKFED has the credentials and pedigree in the region, and in Uganda, with successful investments which have over the years and decades matured into market leaders, and would be a plum choice surely for any government to team up with, not the least to accomplish the vision of having at least a quasi national airline where government has a stake in.
But like with Precision Air, economic realities count apparently for little when egos need stroking and grandstanding takes over from making logical decisions based on fact. What East Africa ought to do is to embrace Kenya Airways as our all link to the world and have airlines in Uganda and Tanzania which add choices and give options in the nearer and wider region. RwandAir is such an example. That airline is of course a parastatal as their efforts a few years ago to privatize were also shelved when Kigali decided to go it alone, and provided the resources and injected expertise on management and board level to turn their vision into reality. Hence, RwandAir today is the number three jet airline in the region after Kenya Airways and Precision Air and going places. If and only if Tanzania and Uganda critically review their aviation policies and make decisions based on fact and not on fiction, could Air Uganda and Precision Air become quasi national carriers, fulfilling strategic requirements of connectivity while at the same time, run on private sector principles without political interference would make them sound, viable and profitable investments for the respective governments. Watch this space as only time will tell if cool minds prevail, perhaps prodded by empty pockets, or if megalomaniac schemes and ego trips will override common sense and economic forecasts.
