Uganda Airlines: Good investment wrong timing

Government’s views

The feasibility report compiled by the National Planning Authority that is being used to operationalise the Uganda National Airlines recommends that government implements the investment option for aircraft purchase with a combination of regional and international operations that gives greatest financial and economic benefits.

It also recommends that the investment in the national carrier should be considered as an infrastructure for enhancing the country’s global connectivity and competitiveness, beyond the direct financial benefits.

In addition, the carrier will play a critical catalytic role in tourism development and promotion, export growth, investment in various priority sectors and global networking.

On the type of aircrafts, the report says that a comparative technical evaluation of the different aircraft types based on market suitability, aircraft cost, efficiency, reliability and resilience, cargo capacity and configuration, cabin comfort and technology, among others, the team identified the CRJ 900 and Airbus A300-200 series as the most appropriate aircraft types for the national carrier’s regional and international operations, respectively.

“The scenario to purchase aircraft for both regional and international operations gives the highest financial and economic benefits to Uganda compared to all the options under the scenario of leasing aircraft,” the report further reads in part.

It adds that all leasing options give financial and economic results that are below the minimum threshold required for investment decision. In particular, it is only the case of leasing aircraft for regional operations that marginally meets the threshold for investment.

The report says that total cash [equity] of US$140million will be required to replace the option of using aircraft as the asset base.

Government officials believe that the national carrier will help the country save about US$540 million (Shs2trillion) annually which is being incurred in form of higher transport costs (extra charges) to passengers originating and terminating at Entebbe International Airport, due to absence of a national carrier.

The feasibility report says that the best-case investment scenario (combined regional and international aircraft purchase) would generate a direct net present value economic benefit of US$580 million, after taking care of all the investment and operating costs, over a 15-year period.

The study recommends operation of domestic air transport routes through franchising and or partnerships with domestic private operators.

 Going forward

In an advisory tone, a senior economist at the World Bank Uganda office told The Independent on April 03, that as the government hurries to operationalise the carrier, it must take into consideration the risks involved and use a business model that will not only see it operational but become a valuable company to its shareholders –the taxpayers.

Ggoobi said the idea of having a national carrier supporting growth sectors of tourism, agriculture and exports of goods is good for the entire economy.

However, he said that the best idea now is to fund the Airline using public finance even if it means forfeiting a few roads and political activity funding.

He also said that the government could also opt to use some of the funds meant for development projects whose absorption capacity is low to fund the national carrier activities.

“We should not be borrowing to invest in the Airline because it won’t make money to pay back the loans,” he said.

He added that the government is making a mistake to operationalise the Airline basing on recommendations made by the National Planning Authority top officials, who he said, are merely planners, theorists and bureaucrats, with unknown aviation expertise.

“Cumulatively we are making mistakes; someone needs to call this thing to order, run it in an orderly way…it is not too late to halt the process.”

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