Uganda Airlines: Poor man with six new suits

Author: Okodan Akwap. PHOTO/FILE.

What you need to know:

What is hurting the airline now was well known! But we went ahead to revive it wrongly!

According to the Independent Magazine of August 8, 2018, the cost of one wide-bodied Airbus A330Neo aircraft was $293 million (about Shs1.1 trillion). For two, we committed to pay $586 million (about Shs2.2 trillion). The magazine said each narrow-body Bombardier CRJ-900 plane cost $190 million (about Shs725b). For four, we committed to pay $760 million (about Shs2.9 trillion). In total, our commitment was $1.3 billion (about Shs5 trillion).

For a poor landlocked country to fork out a cool Shs5 trillion to buy six jets is quite unsettling.  An aviation source told me: “It was a great mistake because a huge chunk of our investment capital has been committed to that unprofitable project.”

I understand that the two Airbus aircraft fly to Dubai three to four times weekly. Since only one aircraft flies each time, it means utilisation is very low. This is crazy, given the slim chances for airline profitability in Africa.

My source said: “Many airlines in Africa make losses because of poor management, poor decision-making, corruption, and the mistake of allowing politicians to infiltrate airlines.”

This was also noted in a report written after a 2015 feasibility study undertaken by the National Planning Authority on the revival of Uganda Airlines.

The feasibility report correctly stated that the need for Uganda Airlines was based on: (1) the objective to enhance Uganda’s competitiveness by reducing the cost of air transport and easing connectivity to and from Uganda; (2) the strategy to support faster harnessing of opportunities in the economy (tourism, agriculture, minerals, oil and gas); and (3) the requirement to establish air transport infrastructure to meet the growing demand for air transport for passengers and cargo.

However, on lessons learned from successes and failures, “political interference” was cited thus: “National airlines are not free to make good business decisions due to politicians interfering in the running of the airline. This starts from selection of board members to staff recruitment, procurement, selection of routes, flight operations, demands for free tickets, and lack of payment for tickets.” And on “lack of technical expertise to run the business,” it was noted: “Management not selected on merit and, therefore, unable to run a high-cost low margin industry.”

There! What is hurting the airline now was well known! But we went ahead to revive it wrongly! Aviation sources told me we should have proceeded in well-thought-out phases. In phase one, we would have wet-leased two to three narrow-body aircraft for a start for the regional routes such as Nairobi, Dar-es-Salaam, Juba, Kinshasa, etc. Wet-leasing means renting a plane and its crew.

We would run this operation for two years as the routes develop and passengers get used to the product. It would be a low-cost carrier running on a no-frills basis. Meaning that we would not provide passengers extra services.

In phase two, we would lease two narrow-body medium-range aircraft for the Dubai, Mumbai, and Johannesburg routes. We would also consider introducing cargo operations using freighters like the Airbus A330-200 or Boeing 777 since cargo is a very lucrative business. Ugandans may be interested to know that the profit-making Ethiopian Airlines has 13 aircraft for carrying cargo.

Start-up airlines must keep costs as low as possible. It was wasteful to spend Shs788m on 600 guests invited to sip champagne at a ceremony held to receive the first Bombardier. It was also thoughtless to give $12,750 (Shs48m) to the Chief Executive Officer for fishy foreign trips.

To try to at least minimise losses – forget profits for now – a source suggested headhunting a foreign CEO who has experience with start-up airlines. Alternatively, a CEO from a blue chip firm in Uganda such as Stanbic, Standard Chartered, ABSA, MTN, or Airtel could do the job.

Even with no experience in airline management, these people are good at planning, strategising, marketing, and public relations. They have financial discipline and are used to accounting to the boards of their companies, unlike people who think they are only accountable to the State House.

Another alternative is to disband the workforce and rent out the planes. Uganda Airlines is just like a poor man owning six expensive new suits!

Akwap (Ph.D) is an associate consultant at Uganda Management Institute.

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