Why was it important to revive Uganda Airlines?

A functional national airline has potential to improve the balance of trade

By Owen Wagabaza

In 2016, during the Independence Day celebrations in Kiyunga, Luuka district, President Yoweri Museveni announced the revival of Uganda Airlines after 15 years on the sidelines. According to Dr Joseph Muvawala, the executive director of the National Planning Authority, the airline is in line with Uganda's Vision 2040, which sets the long-term aspirations of transforming Uganda from predominantly peasant to a modern and prosperous country within 30 years.

The idea was formulated in the First National Development Plan and the Second National Development Plan where the airline is highlighted as one of the flagship projects expected to drive Uganda towards its medium to long-term development goals.

"The decision to revive the airline was based on Uganda's past aviation experience, as well as lessons from the success and failure of airlines globally," Muvawala explains.

Aviation history

Uganda's aviation history spans from 1943 with the formation of the East African Airways from the former Wilson Airways that collapsed with the East African Community and the imposition of the economic embargo in 1975/6.

The first national carrier for Uganda, Uganda Airlines, was formed with an airline fleet of 15 aircraft linking the country to Africa, Europe and Middle East. However, the airline suffered financial difficulties and in May 2001, it was liquidated after years of losses.

There have been numerous unsuccessful attempts to establish a local-based airline including attempts by Africa One, East African Airlines, Alliance Air, Victoria International Airlines and Air Uganda among others.

"These airlines failed due to under-capitalisation, old technology aircraft, political interference, lack of route rights, poor management and lack of appreciation of value addition to the airline," Muvawala says. CLICK HERE FOR MORE ON THIS STORY

National carrier to start with regional markets

Uganda's air traffic has continued to grow albeit at a modest state over the last few years due to the global downturn in the world economy and the lack of a home-based airline.

Traffic statistics for 2016 from Sabre data show that passengers were 1,572,115, all of which were carried by airlines from outside Uganda. According to the National Airlines Business and Implementation Plan, passenger growth rates have largely been below historical levels since the closure of Air Uganda in 2014.

The national carrier will have the opportunity to facilitate growth of the sector by providing the necessary connectivity for business and the public to regional and international destinations accordingly. Cornwell Muleya, the technical advisor to the Presidential National Airline Implementation Taskforce, explains that for any airline to succeed, it must be in control of the home market.

"The first step in any business is finding the market that you have locally and regionally. Once you build on that market, then you can try elsewhere," Muleya says. "We are, therefore, starting to build a structure that allows to consolidate traffic through Entebbe. The idea is that we start with the regional routes for at least two years and after that, we will go international," he adds.

Planned routes

Analysis of the Uganda air travel market shows that the largest demand for air travel is within Africa destinations and East and Central Africa. According to the National Airlines Business and Implementation Plan, this core market accounted for more than 60% of the total traffic in 2016.

As such, the initial fleet of CRJ900 aircraft was selected to address this need and to ensure the operation of adequate frequencies to these regional markets in order to provide connectivity, stimulate traffic growth, and develop the interconnecting hub at Entebbe airport.

The main regional destinations for traffic are Nairobi (the largest market), followed by Kilimanjaro, Kigali, Johannesburg and Juba. Notable from the analysis are the unserved markets, including to Khartoum, Mogadishu, Kinshasa, Lubumbashi, Goma, Mombasa, Lagos and Accra, where connectivity to Uganda requires at least one intermediate stop in both directions. CLICK HERE FOR MORE ON THIS SUPPLEMENT 

Mistakes to avoid if Uganda  Airlines is to succeed

By Owen Wagabaza

National airlines in Africa have had a checkered history, with the majority failing and closing within a short period. For Uganda's case, the national airline suffered financial difficulties and in May 2001, the airline was liquidated after years of losses.

With the Government set to launch Uganda Airlines, below, we take a closer look at some of the principle causes for the high proportion of failures in the industry as listed in the National Business Airline and Implementation Plan, a document that present a detailed case and final review of the viability of establishing a national airline with a hub at Entebbe International Airport.

Undercapitalisation

This happens when the airline is formed with little capital and the funds are not enough to enable it complete its intended network development. The airline then runs out of money before gaining the trust of passengers, travel agents, tour operators, suppliers and other airlines in the industry

Use of old technology aircraft

These are cheap to lease, but expensive to run. The temptation is to use the limited capital to get cheap old aircraft with a view to upgrade the fleet later when business takes off.

The problem is that business will never take off because the old aircraft will cost more in maintenance as the frequency of breakdown is higher.

They will have a poor cabin, with poor seats, which will not enable the airline to compete with others that have new aircraft. Old aircraft also consume more fuel, causing the operating costs to be higher, leading to a downward cycle to closure. CLICK HERE FOR MORE ON THIS STORY 

Why Uganda Airlines had to buy new planes

By Owen Wagabaza

In May 2001, Uganda Airlines was liquidated after years of making losses. At the time of its closure, the national airline had endured a number of challenges, among which was the constant aircraft breakdowns and high fuel costs. Eng. Dickson Turinawe, who worked with the Uganda Airlines for 22 years in several management positions until its closure in 2001, explains that in airline operations, fuel constitutes 25% to 36% of the total costs.

However, for the Uganda Airlines, given itsaged fleet, the average figure was 40%. Industry experience of managing airlines shows that the major operating cost drivers constitute fuel and maintenance and minimising these costs requires a wellbalanced aircraft fleet and renewal programme.

It is for this and more, that the team behind the revival of the Uganda National Airline have opted for new aircrafts. According to the National Business Airline Implementation Plan(NBAIP), a document that presents a fully detailed case and final review of the viability of establishing a national airline with a hub at Entebbe International Airport, newer aircraft are more fuel-efficient compared to the old ones and benefit from technological advances that lower the fuel burn.

"Equally, the acquisition of a new aircraft is accompanied by support packages that help start-up airlines to build own internal capacity to operate and maintain aircraft efficiently," the NBAIP states.

The NBAIP adds that a diversified airline fleet presents operational and maintenance challenges as each aircraft type in the fleet requires specialised competences for staff across the board and erodes the benefits arising from economies of scale in acquisition of spares.

The national airline's network is designed to connect domestic, regional and international destinations in Africa, Europe, the Middle East, as well as Asia and as such requires aircraft that are suited to each of the identified market segments.

Different aircrafts have been evaluated and the fleet has been chosen based on a number of forecasts, the route structure and network, aircraft performance characteristics, range, payload limitations, maintenance costs, engine and operational efficiency, aircraft design and technology, aircraft suitability on network, aircraft capacity and design, as well as product advantages.  CLICK HERE FOR MORE ON THIS STORY 

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