Monday 5 February 2018

UGANDA: $388 Million Needed To Revive Uganda Airlines

Uganda government is looking for $388 million to revive Uganda Airlines, by September.

This follows the Cabinet’s approval of a blueprint last year detailing how Uganda Airlines could start flights from Entebbe across East Africa before going international.

The airline was grounded fifteen years ago. The plan proposes an initial a fleet of four Bombardier CRJ900 and two wide-body A330-200 aircraft.

The government, which is the principal shareholder, will raise $70 million in four tranches over a three-year period.

The first injection could be in the upcoming budget statement.

Another $318 million required for aircraft acquisition will be raised through a mix of financing tools.

The business and implementation plan proposes that these funds be sourced from external financiers, through a combination of banks, private equity firms, international aircraft finance lenders, lessors, government borrowing, export credit agencies.

Works and Transport minister, Ntege Azuba, has been tasked with the responsibility of supervising the project for which a taskforce was appointed in 2016.

The plan also laid out the financial forecasts based on route structures, expected level of operation, future market conditions and observed industry historical performances.

However, it could take a while longer before Uganda Airlines takes to the skies again taking into account the capital requirements, the 15 years that the carrier has been grounded, the failure to launch in September last year as planned, and the envisaged financing model.

Eventually, Uganda Airlines should join other carriers in the region like RwandAir, Kenya Airways which recently secured rights for direct flights to the United States market, and continental powerhouse Ethiopian Airlines.

Ethiopian Airlines announced last month it would assist a score of African countries, including Uganda, to establish or revive their national airlines.

It followed up on the announcement by taking a 45 per cent equity in Zambia Airways.

Mr Ntenge said the re-establishment of Uganda Airlines aims at improving air transport connectivity to and from Uganda in order to enhance the country’s competitiveness.

Just last week, 23 African countries signed on to the single African air transport market that is intended to drive down air fares by allowing the airlines of signatory countries to freely access each other’s airports.

Uganda and Tanzania have not assented to the treaty.

23 member states pledge to commit to the Single Air Market, the implementation of which will increase the number of routes, reduce the cost of air travel and contribute to the expansion of intra-African trade and tourism, chairperson of the African Union Commission says.

Rwanda President Paul Kagame and AU Chairman said affordable air travel was important for the overall development of the continent especially where international airlines have proved to be expensive or non-existent.

The countries that pledged to the Open Skies initiative are Benin, Botswana, Burkina Faso, Cape Verde, Republic of Congo, Ivory Coast, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo and Zimbabwe.

Jambo Jet, part of Kenya Airways, announced twice daily flights between Nairobi and Entebbe beginning February 15 as part of its regional expansion.

The low-cost airline will depart from JKIA at 9 am and 5.30 pm, and from Entebbe Airport for Nairobi at 11 am and 7.20 pm daily.

Last year, Cabinet approved a proposal to get the Uganda Airlines project off the ground.

A key aspect of the decision is to get on board a transactional adviser to guide the process.

Works minister Aggrey Bagiire said that since the political leadership had already explained the reasons for reviving the national carrier, as listed in the Second National Development Plan (NDPII), the approval was expected.

Whether we need a national carrier or not is no longer a debate, Mr Bagiire said.

It is true the matter came up in Cabinet but it would be treasonable for me to discuss what was discussed, he added.

The transactional advisor will also look into how the new national carrier would run and other key variables of the project.

Although the revival plan also includes specific timelines,that the national carrier was not about to fly any time soon as had been hoped, owing to financial setbacks and other structural challenges.

Uganda used to have a national airline, established in May 1976 under the Idi Amin government.

However, Uganda Airlines was liquated in 2001 over heavy debts of more than $6 million.

The liquidation did not settle in well with a number of stakeholders, who blamed the government for deliberately killing the airline.

During his inaugural address to Cabinet last year, President Yoweri Museveni said the lack of a national airline was a big shame, criticising Kenyan, Ethiopia and South African brothers for ditching the comradeship and instead opting to exploit Ugandans.

National airlines of those countries, which fly through Uganda, were accused of charging exorbitant ticket prices.

Tourism Observer

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