Uganda Airlines looks for  silver lining on dark cloud

Uganda Airlines paid $262,345.64 (about Shs1b) to a fraudulently created account in the Democratic Republic of the Congo (DRC) during the 2022/23 financial year, a new government audit shows.

The Office of the Auditor General, during its evaluation of the airline’s operations, discovered that Uganda’s flag carrier had improperly sent the aforesaid amount of money to an unidentified account under the DRC’s Civil Aviation Authority’s name.
Officials from the airline, however, point out that the Auditor General (AG), Mr John Muwanga, could have misunderstood the circumstances in which this transaction occurred and that the error came from the DRC’s civil aviation authority.

“We were supposed to send some payments to the DRC civil aviation authority. So one time they sent a request for that payment in an e-mail. We processed the payment and sent it. However, we received another e-mail from the same authority requesting the payment on a different account, which we declined because we had already done so in the prior request,” Ms Shakila Rahim Lamar, the Uganda Airlines spokesperson, revealed.
Sunday Monitor understands that since the issue involves two players in different countries, the case has been referred to the International Criminal Police Organisation (Interpol) for investigation. 

We reached out to Ms Grace Akullo, Uganda’s director of Interpol, and she promised to revert with a response to our query after cross-checking her records. She did not respond to our repeated attempts to remind her.
A police source nevertheless said that Interpol Uganda is supposed to coordinate with the DRC police after getting a notice from them. We were unable to establish if either of the two had happened. But Ms Jenifer Bamuturaki, the Uganda National Airlines Company Limited (UNAL) chief executive, urged calm, pointing out that this was the first time the airline had experienced such an incident.
“We have measures in place to avoid future occurrences as teams have undergone training on cybercrime,” she wrote in response to our query.
Ms Bamuturaki further said the national carrier was economical with information on the fraud case AG Muwanga spotlighted because UNAL fears “the culprits will disappear.”

Due diligence
According to Mr Damas Mulagwe, a financial consultant and a former auditor at Dmer Associates, an e-mail request for change of account information is acceptable if authentic.

But he added that an e-mail request is not conclusive enough if there are no official documents exchanged between parties.
“Technology has come with a lot of fraudsters and banks have lost a lot of money because of that,” he said, adding that the bank where the transaction was made ought to have written an independent letter to confirm the new account that belongs to their client, as well to fulfil proper procedures, without queries on transactions between.

In his report, AG Muwanga said Uganda Airlines must smooth over its rough edges not least because its balance sheet shows that it is struggling to break even. The airline, however, attributes its travails to underutilising of its equipment due to its crew shortages and delays in the opening of the medium-haul routes on which the Airbuses were supposed to be deployed during the period.

Records show that its revenues are increasing and in the 2022/23 financial year they recorded a 62 percent jump to Shs230.4b. Despite this, its losses increased to Shs325b over the same period, from Shs265.91b. This was attributed to the airline’s “significant 39.8 percent increase in direct costs of Shs140b.”
Uganda Airlines struggled to meet its revenue target of Shs491.8b in the last fiscal year due to the inability to launch several of its planned routes and the delay of the new ones it had secured.

Official records show that “aviation fuel, crew allowances, crew salaries, pilot training, and depreciation [of the airline’s assets] were [its] major cost drivers.”  In order to revitalise UNAL, the government intends to give it Shs120.9b in the 2024/25 fiscal year. This is because the airline is in need of money to pay employees’ salaries, make payments to the Civil Aviation Authority, obtain certifications for the ISOA and IATA Operational Safety Audit (IOSA), train employees, and buy aviation fuel. Other expenses are aerial insurance, on-board meals, and ground handling charges.

UNAL business plan
Uganda Airlines has also created a business plan to supplement government funding. It is currently increasing its crew size by double to address flight delays, ultimately bringing it closer to a break-even point. UNAL has been having difficulty opening the medium-haul routes due to staff shortages. This prompted it to trim back on some flight numbers for routes like Nairobi and Juba, from three daily flights to two. 
Uganda Airlines also delayed its plans to open new routes in London, Guangzhou, Mumbai, Lagos, Jeddah, and Guangzhou. Sunday Monitor understands this is because it needed to stay under the legal cap on the number of crew.  Ms Bamuturaki also disclosed early this year that some of the airline’s crew was lost to other better paying airlines. Ultimately, AG Muwanga notes in his audit papers, “this affected the achievement of targets for the passenger numbers, passenger revenue, total number of routes, average load factor, average route fare per passenger and total hours of operation per aircraft type, among others.”

Steps being taken
The airline is currently hiring more first officers and captains to make up the necessary 24 pairs of cabin crew members, up from the current 13 pairs. This is in addition to acquiring a plane that must fill the capacity void left by the A330-800’s 257 seats and the Airbus fleet’s 76 seats with the Mitsubishi CRJ-900. While the airline’s planned network of routes throughout Africa can be covered by the CRJ-900’s operational radius, carrying both passengers and cargo will need to be compromised due to the aircraft’s severe weight limitations. That is presumably the reason the airline, which operates six aircraft, chose to acquire an Airbus A320neo under a wet-lease arrangement.

Other airlines
Uganda Airlines is not the only carrier in the region harbouring expansionist plans. Air Tanzania has followed its lead by adding a second Boeing 737 MAX 9 jet to its fleet. This is despite experiencing its sixth consecutive year of losses. The 2022/2023 financial year saw Air Tanzania record a loss of Shs85.8b ($22.19m) for the year, up from Shs58.7b ($15.17m) in the 2021/2022 financial year, according to official Tanzanian government records.
Kenya Airways has already swung an operating profit of Shs306.7b (Kshs10.53b) last year after recording a Shs163.1b (Kshs5.6b) loss in 2022. This was its first operating profit since 2017 orchestrated by a 35 percent increase in passenger numbers. It is now planning to scale its routes to places like London.