Airline traffic building up as investment interest grows

Entebbe international airport has been one of the underserved destinations on the African continent.

Now with a growing tourism industry, the lifeblood of the aviation industry, and the discovery of oil together with Uganda’s positive economic prospects, the airport has started attracting the attention of global airlines to make the East African country more connected than ever.

This is expected to provide a link from the traditionally neglected destination to the rest of the world.
Turkish Airlines first followed in the footsteps British Airways, KLM and Emirates when it commenced direct daily flights to Entebbe from its Istanbul hub in mid 2010.

The Istanbul-based airliner was followed by the Doha-based Qatar Airways which commenced direct daily flights to and from Entebbe to its hub early this month.

Giant carriers
Gulf Air, another giant carrier from Bahrain, is also expected to join the growing list of giant carriers plying the Entebbe route after it announced last month that it will re-launch daily flights to Entebbe early next month.
Gulf Air was in in this market until 1993 when it halted operations on grounds of inappropriate aircraft size.

The entry of new carriers serving the international route is expected to break the dominance that has been mostly enjoyed by Emirates, KLM, British Airways and Brussels Airlines; flying to business and holiday destinations in Europe, Middle East and Asia.

With a variety of options for airport users to choose from, competition is expected to heat up, necessitating players to up their game especially in the area of quality of service delivery and pricing, to remain competitive.

Kenya Airways country manager Uganda, Mr Donald Ajuoga said: “Competition is good particularly for consumers as they benefit from affordable and quality services. They also have a wider choice of carriers to travel to their destinations.”

Kenya Airways is East Africa’s market leader both by passenger numbers and revenue. The carrier which flies to 45 African cities is nipping at the heels of EgyptAir and South African Airways, the largest operators on the African continent.

KQ’s shareholders recently approved the carrier’s plan for a rights issue to raise additional capital of about Shs587.4 billion (KShs22 billion) from the stock market to fund its expansion plan as it moves to consolidate its position in the African region.

Turkish Airlines country manager Uganda, Mr Orhan Subay noted that competition will better service delivery and lower air ticket charges to certain destinations.

He said Turkish airline will compete by offering professional services to travellers.

“Turkish Airlines treats travellers as guests but not as passengers and this enables us to serve them better,” Mr Subay told Prosper recently.

International airlines charge between $420 and $800 to overseas destinations, depending on the airline.
Qatar Airways chief executive officer, Mr Akbar Al Baker said in an interview with Prosper recently that the new entrant will offer competitive products that are expected to give it a competitive edge in the industry.
The influx of giant airlines also presents big tourism opportunities for Uganda’s tourism industry to tap into. The development is also expected to open up new job opportunities for Ugandans.

However, as the destination continues to attract global carriers and with the existing ones increasing frequencies and fleets, it is feared that it could pile pressure on the existing facilities, resulting into congestion at Uganda’s only international airport.

And being a land locked country; the airline industry is of strategic importance to Uganda as it guarantees an alternative gateway to the rest of the world and it is the only means that can facilitate movement of people and goods overseas without having to go through another country.

“The main challenge facing Uganda’s airline industry are infrastructural constraints, given the growing industry and the entry of many new players,” Mr Ajuoga said.

He further explained that with the discovery of oil, Uganda is certain to experience a boom in foreign investment, which in turn will spur growth in passenger and cargo volumes and that a lot needs to be done to expand the infrastructure to match this growth.

According to statistics from CAA the number of commercial aircraft movement increased from 17,253 in 2005 to 23,320 in 2010 due to an increase in weekly frequencies by airlines and new airlines commencing flights into and out of Entebbe.

By 1993, Entebbe Airport was handling about 400,000 passengers annually but the number has since risen to over one million passengers, presenting an attractive growth pattern.

Figures show that international passenger traffic to Entebbe Airport grew from 551,853 to 1,023,437 between the 2005 and 2010 period although domestic traffic declined from 38,924 to 11,879 over the same period.

Improved security
Increased international passenger traffic has been attributed to improved security in the country.
Imports by air on the other hand grew from 14,180 tonnes to 21,323 during the period due to importation of telecommunication equipment by mobile phone companies, while exports decreased from 38,231 tonnes to 27,751 due to the financial crisis in Uganda’s key export markets.

Mr Al Baker said that proper aviation infrastructure such as well maintained airports and air traffic control systems are critical to cater for a growing industry.

“It is of particular importance to an emerging economy like Africa and Uganda in particular where greater passenger travel and more flight movements put more pressure on ensuring there is a highly integrated and efficient aviation infrastructure,” he said.

The number of giant global airliners operating at Entebbe Airport has grown to over six including British Airways, Emirates, Turkish Airlines, Qatar Airlines, KLM and Brussels Air among others.

Meanwhile, the number of regional and continental carriers has also grown significantly with the likes Kenya Airways, Air Uganda, South African Airways, Ethiopian Airlines, Fly 540, Egypt Air, Precision Air, RwandAir, Roya Daisy and Feeder Airlines plying the Entebbe route.

However, infrastructure constraints could become Uganda’s biggest limitation to the growth of the aviation industry if steps are not taken to expand the airport facilities to cater for the present and future expansion by regional and international airlines.

Despite the Civil Aviation Authority (CAA)- the regulator of Uganda’s airline industry- announcing plans to undertake an airport infrastructure master plan to expand airport facilities so as to meet the growing aircraft and customer traffic mid this year, not much has been done so far.

CAA managing director, Dr Rama Makuza, however, told Prosper last week that internal preparations are on-going and that the main study would commence in January next year.

Under the plan, the authority will relocate the cargo and aviation fuel facilities to the area adjacent to CAA headquarters to allow for expansion and modernisation to enhance cargo volumes and fuel storage capacity respectively.

This, Dr Makuza said will create room for the expansion and improvement of the passenger terminal building and its facilities including check-in and immigration counters.

The 2007 Commonwealth Heads of Government Meeting (CHOGM) gave the airport a facelift that saw a second apron (aircraft parking area) being constructed and immigration counters and baggage reclaim belts and arrivals expanded.

The growing numbers of carriers and passengers into Entebbe are narrowing the facilities. Currently, the main passenger building terminal parking area has 11 days while the new aircraft parking area, which is currently used by the United Nations aircrafts, has 25 days.

Dr Makuza said that CAA also intends to construct an additional tank with capacity of 2 million litres for aviation fuel in the current aviation fuel facility to enhance storage capacity.

“A holding ground to accommodate 50 trucks of aviation fuel will be constructed to provide for fuel on wheels. This is geared towards enhancing storage capacity of aviation fuel at the airport to support the growing aircraft movements,” he explained.

The airport has runways including RWY 17/35 - the primary runway - and RWY 12/30, which Dr Makuza said would be strengthened in the medium term.

The airline industry is also constrained by high global fuel prices. Aviation fuel accounts for over 30 per cent of the airline’s total operation costs, up from about an average of 15 per cent per cent two years ago.
Airlines operating at Entebbe Airport also cited high costs of landing and handling flights, saying they are significantly higher than other regional airports, adding on the high overall operational costs. This makes Entebbe one of the most expensive routes in the region.

For instance, comparative handling fees for 100-seat aircraft at Entebbe are $1,100 while Tanzania’s Julius Nyerere International Airport, Dar es Salaam charges $729 and Jomo Kenyatta international Airport in Nairobi charges $595.

Landing fees for the same size of aircraft are $480 at Entebbe, $313 at Julius Nyerere International Airport, and $250 at Jomo Kenyatta. Airport user’s taxes and charges are $50 for Entebbe compared to $38 for Dar Es Salaam and $20 for Nairobi.

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