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The costly, unwise and ill advised decision to resurrect Uganda Airlines that has so far cost 3 trillion shillings
The unwise Uganda airlines experiment has so far cost 3 trillion shillings and more trillions of public funds will be thrown down the toilet if it is not ended very soon. In the first place the decision to resurrect the national airline was not based on economic viability but on nostalgia, pride and misguided patriotism. The powers that be woke up one day and decided that it would be good PR to resurrect the national airline. No one stopped to think whether it made economic sense given the historical inefficiency of government enterprises, financial struggles of other national carriers such as Ethiopian Airways, South African Airlines and Kenyan Airways. No one stopped to think about how Uganda Airlines would break into a crowded market compromised of well funded and efficient players such as KLM, Qatar Airways and renown operators such as Ethiopian Airways, South African Airlines and Kenyan Airways. No one stopped to think about what unique product or differentiator Ugandan Airlines was bringing to the market to make it distinctive and attract clients. No one stopped to think about the strategies to avoid the political interference and corruption that sunk government enterprises such as Uganda Telecom, UCB and countless other failed government owned businesses. No one stopped to think about the lack of trust and Goodwill in the ability of the government to properly maintain and service the planes. In a country where trust in the government is none existent due to oppression, corruption and history of inefficient public service delivery, it’s an uphill task to convince Ugandans to fly with Uganda Airlines.
Given the low profit margins on ticket sales, price competition was never an a real option to lure customers to Uganda Airlines. So the geniuses that dreamt up Uganda Airlines part 2 knew from the start that it would never ever break even but nonetheless went ahead and poured trillions of shillings in reviving it. Maybe we can give them the benefit of the doubt and imagine that it was done in good faith and with sufficient due diligence and market research. Maybe the promoters of the business had reasonable grounds to believe that Uganda Airlines would break even in three years. However, it’s impossible to pretend that there was ever any good business reason to resurrect Uganda Airlines after the predictable telenovela that has unfolded three years down the road.
For example, according to Uganda Airlines, in the Year ending December 2020, the Airline carried 103,749 passengers generating revenue of forty billion Shillings. In 2021, the National carrier Uganda Airlines posted gross income of USD 13m after transporting 98,000 passengers. The income according to the airline’s acting Chief Executive Officer Jenifer Bamuturaki represents 64% of the set target of USD 20M for the financial 2021/22. These might seem to be impressive figures if they were real but for the avoidance of doubt they are likely complete fiction like most government of Uganda statistics. From March 2020 to December 2020 air travel was affected by the Covid-19 Pandemic, lockdowns and travel restrictions imposed to reduce the transmission of Covid-19. How is it possible that Uganda Airlines managed to transport more passengers in 2020 (103,749 passengers) than in 2021 (98,000 passengers) where air travel had resumed due to relaxation of travel restrictions as a result of increased vaccination rates and natural immunity.
Even if we believed the accuracy of the statistics, we maintain that Uganda Airlines will never be profitable. One of the Bombardier planes that Uganda Airlines acquired costs close to sixty million dollars whereas the Airbus planes cost close to one hundred and twenty million dollars but in three years the gross income of Uganda Airlines before accounting for expenses is less than a third of the cost of acquiring one bombardier plane in it’s fleet. When you factor in the cost of fuel, maintenance, ground handling, emergency services, personell costs, taxes, rent and overhead costs Uganda Airlines gross income is peanuts and insignificant. To break even Uganda airlines needs to make more than a billion dollars per year and transport more than two million passengers per given the ticket prices on its routes. First of all it doesn’t have sufficient planes to carry that many passengers in a year. Secondly, it doesn’t have sufficient good will and history of efficiency to attract that many passengers in a year. Thirdly, history and trends are against it ever achieving profitability given the fate that befell more efficient and credible airlines such as South African Airlines. Other factors that act against Uganda airlines include.
- Political Board of Directors
- Corruption and plunder of airline resources.
- Above market value salaries
- Effects of the Covid-19 Pandemic
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