“Government killed Uganda Airlines, revival needs much more”

In May 2001 government liquidated Uganda Airlines. However, with a view of, understanding the carriers troubles, considering that there has been a clamour for the revival of the national airline, Mark Keith Muhumuza sought out Benedict Mutyaba, the man who, in his position as managing director, saw the airline ride through some of its worst years. According to Mutyaba, it seemed as though there was a deliberate plan by some government officials (who he does not name) that tirelessly worked to kill the airline.

At 30 years in 1992, Benedict Mutyaba was appointed Uganda Airlines managing director in a tight race.
At the time, the airline had a bloated staff list of more than 2,000 people working on a fleet of three Boeing 707 and two smaller F27 Fokkers.
It was an overstaffed airline, inefficient and running a debt of $12m about (Shs38.4b) at the current exchange rate.
The period between 1992 and 1996 was considered one of the glory years of the airline, at least according to Mutyaba.
In an extensive interview that sought to understand Uganda Airlines’ troubles amid the current demand for the revival of the national carrier, Mutyaba told this newspaper, “there is a likelihood some people in government wanted Uganda Airlines dead”, revealing how the carrier was suffering with a bloated staff list, poor quality manpower and government interference.
“I think at some point, staff were about 2,000. The company couldn’t manage to sustain such manpower and in most cases people were idle,” he said.
“A friend who would call a minister was offered a job. So many posts that were not useful were created. People were earning for doing anything due to nepotism and influence peddling,” he adds.
The airline, Mutyaba said, also suffered with an unstable exchange rate, considering that most of its payments were pegged on the shilling, yet airlines expenses are done in dollars.
Thus by appointing Mutyaba, who was the corporation secretary at the time, the board, which was headed by Ezra Suruma, the former Finance minister, expected him to look into all these problems as well as lifting the airline to sustainability.
After assuming office Mutyaba drastically cut down staff numbers from 2,000 to about 400. However, this was the least of his problems since the airline had lost all the aircrafts after one had crushed in Rome, Italy and the others being downgraded to junk status.
“By that time, we had lost all the planes. One had crashed in Rome and the other couldn’t pass the test of flying people because they were too old. We had only one aircraft and that was the F27. If you do not have aircrafts, your on-time is going to be affected. They used to call Uganda Airlines a taxi because the service was very unreliable. This exacerbated the loss of the company as people picked other options,” he said.
However, in due course “we made lease agreements with a firm in Australia and Air Zimbabwe, who without any government guarantee gave us aircrafts. The reenergised airline was now flying to Dubai, Zimbabwe, Tanzania, Zambia, Kenya and South Africa. But still we were constrained by lack of capital. We needed to expand the fleet to go to Europe, Asia and America among others”.

Why did Uganda Airlines collapse?
According to Mutyaba, government failed to realise the importance of a national airline, considering “we weren’t getting any funding from them [government] even at the most of critical times”.
“All the money the airline was making, was going into debt servicing. By 1994, we had reduced our debt to about $6m. Money to invest in marketing, improving the fleet and entering alliances was not available yet competition was not resting,” he said.
According to Mutyaba, countries always leaned on protecting national airlines against competition through subsidies, codes, taxes and airport charges but this was different for Uganda Airlines.
“It is as if someone in government was planning to kill the airline,” he said, wondering how at such a critical time of no funding government would not waive off debts as well as bringing critical partnerships and manpower that could make the airline more profitable.
For instance in 1994, Mutyaba said the Kenyan government waived off a large debt in Kenya Airways and turned it into equity.
In addition the government pumped funds in the airline and negotiated a partnership with KLM, a Dutch airline, which as he said “exposed the carrier to global alliances, better expertise and aggressive marketing”.
“We even had some investors who were willing to pump money in (Uganda) Airline. One of them was now defunct Swiss Air, Lufthansa and Sabena. They wanted to come to support and benefit. But government was not willing. That is what I do not understand because government was not contributing a single cent. It was so sad because we were in critical need of capital,” he said.
Mutyaba’s disappointment was that government only had interest in the airline when it was doing well, but stayed away when it was in ‘red’.

Failed ventures to replace Uganda Airlines
After Mutyaba had left Uganda Airlines in 1996, he went into politics where he became an MP for Makindye East until 2001.
However, around the same time in 2002, he took a gamble, starting East African Airlines (EAA), which hit the skies in 2002.
But as he said they (and other partners) had burnt their fingers, considering that the airline lasted only three years.
“Prior to starting the airline, we were promised some codes that Kenya Airways was using. Code-sharing would have raised our profile and compete favourably. However, it took us a whole year to finalise negotiations and we got some concessions. By that time, we were already feeling the pinch,” he said.
Two years later in 2007, the East African Airlines folded and closed shop. The aviation sector was in turmoil at the time globally due to the September 11, 2001 terrorist attacks in the United States.
Insurance costs surged and airlines needed to be propped up by governments. In Uganda, EAA hit rock bottom as these charges crept into their operations.
There were several airlines that came in to fill the void left by Uganda Airlines, but they all failed. Air Uganda was the most recent to have folded in 2014 after operating in Uganda for seven years.
According to Mutyaba, Investors who have come in to replace Uganda Airlines can’t be blamed for failing, but there is a larger problem that government must sort.
“…government has no clear policy on aviation. Specifically the airline must be given a chance to develop Entebbe as a hub. For an airline to grow it must have a collecting point. All the failed airlines have not been given that chance,” he said.
Additionally, Mutyaba argues that for a national airline to work government needs to be involved but “must not have a controlling stake. It is only in Ethiopia where government has a controlling stake and the airline has boomed. But this is not surprising. This airline, which started in the 1940s was tested and government gave its managers the powers to manage it without interference,” he said.
“Otherwise if government intends to have a controlling stake in the airline they are talking of (reviving) it will fail,” he added.

Reviving the national airline
A number of government institutions, including National Planning Authority, Uganda Chamber of Commerce and Industry, Ministry of Works and Uganda Tourism Board have been vouching for the revival of a national career, which as Mutyaba agreed “must happen sooner than later if Entebbe International Airport is to grow into an international hub”.
For instance, he said the current Shs1.12 trillion ($350m) airport expansions would only be beneficial if Uganda registers an airline to use the airport as a hub.
The airline he said will not only earn foreign exchange for Uganda but will market the country in terms of tourism.
“Airlines, unlike embassies can have offices in countries they fly to. In order to attract people to fly on the airline, they will market the country. The numbers of tourists who come as a result of this can’t be quantified, but it would definitely play some role,” he said.
However, Mutyaba cautions on how much stake government must own in such an airline if it is to succeed.
This newspaper understands ownership of the proposed airline revival has been a major sticking point in the Cabinet proposals.
“For a country to have a national airline, the government doesn’t have to own the entire airline. If government insists on 100 per cent stake in the airline, then the venture is going to fail. Government shouldn’t have a controlling stake in the airline but rather a minority stake for the airline to build investor confidence,” he cautioned. He said for any investor to start an airline in Uganda, the government will have to have an interest by guaranteeing routes, financing and some level of protectionism.

Government position

Government, through a number of publications, following the liquidation, maintained that Uganda Airlines was a loss making corporation that could not continue to operate.
The airline had by the time of collapse failed to attract any bidder, considering that some investors had already graded it as junk and not worth any serious buyer.
The airline’s image had also been damaged by the Rome crash of one of its aircraft and various incidents and accidents.

What is needed to revive airline
Mutyaba says for starter, the government would have to part with not less Shs320b ($100m), if it is to own 100 per cent of the airline.
The money, he says would for the start go into acquiring one Airbus A330 or Boeing 787 for the long-haul flights to places like London or Dubai.
Then they would need at least another Airbus A320 for routes within Africa like Nigeria, South Africa and Egypt, but would also need two smaller aircrafts for regional routes such as South Sudan, Somalia and DR Congo.
However, at the shortest time possible the fleet would need to grow to at least to eight aircrafts for the airline to make business sense.