Congratulations Uganda Airlines, but avoid inefficiencies

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OPINION

By John Walugembe

In 2013, I wrote an article in this newspaper titled, Reviving Uganda Airlines is long overdue.

I am glad that in 2017, the Government unveiled plans to revive the national airline and took delivery of the first fleet of six jets on April 23, 2019. This was after realising that the country was losing a lot of money through foreign travel and that the airline had additional benefits in terms of branding the country and contributing to export growth.

Uganda was also struggling with interconnection flights to global business hubs. When British Airways cancelled its direct flight to Uganda, the country only remained reliant on KLM, for a direct flight to a European city.

Moreover, regional connections were equally complicated.

Since its revival, the airline has made notable strides. It has expanded from 11 to 16 destinations, including Burundi, DR Congo, India, Kenya, Nigeria, Somalia, South Africa, South Sudan, Tanzania, United Arab Emirates, the UK, Zambia and Zimbabwe. Also, it has diversified its revenue streams by prioritising cargo transportation and self-handling at Entebbe International Airport. This year alone, it has transported over 9,233 tonnes of cargo.

The company has increased its seat capacity without acquiring new aircraft, necessarily. In addition, it has sought to manage its costs through: renegotiating contracts, streamlining staff remuneration, improving its fuel management practices and increasing the proportion of local contracting from 10% to 80%.

As a result of these and other actions, the Auditor General confirmed that the company had reduced its operating losses by 26.5% in the 2023/24 financial year. Experts confirm that airlines that keep their standards up by being reliably on time and improving their operational performance enjoy higher returns.

Today’s customers are much more knowledgeable about the prices, schedules, offerings and operational performance of airlines, than before.

Negative customer reviews, adverse environmental impact, poor on-time performance can contribute to the demise of an airline. Delta Airlines, in the US, enjoys one of the highest customer satisfaction ratings and the lowest cancellation rates, due to on-time performance.

Secondly, although it is great to expand, Uganda Airlines should avoid stretching itself too thin. It is a new entrant in an industry that has humbled giants like South African Airways. It needs to start by consolidating its position in its niche.

What is Uganda Airlines’ niche? Is it the region? If so, this is where its focus should be, to begin with.

As a recent Mckinsey report finds, successful airlines can identify and monetise their niches. The above Mckinsey report finds that slow-growing home markets outperform high-growth markets.

Although fast-growing and attractive markets may appear fancy, they tend to attract many new entrants, which causes ticket prices to fall. This leads to the bruising and collapse of many such airlines.

We congratulate Uganda Airlines on its achievements. However, it should avoid management and operational inefficiencies that led to the bankruptcy of its predecessor.

The writer is a business economist