Monday, June 27, 2016

HOW WE SHOULD RUN UGANDA AIRLINES .... IF WE MUST


President Yoweri Museveni has made a revival of a national carrier a major target for his cabinet in the coming five years.
My opposition to this development is well documented.

Going by our history the proposed carrier will end up being a drain on our treasury, shifting valuable resources away from key services and infrastructure development for years into the future. I have argued that the project is unnecessary, asking what can a state owned carrier do for us that other airlines are not already doing for us?

If it is cheaper fares that we want it would be cheaper to give concessions to airlines flying into Uganda – lower fuel taxes, cheaper landing fees etc in exchange for lower fares than to try and set up our own airline.

The $300m we are supposed to have earmarked for the project is a drop in the ocean. Ask our neighbours whose airline’s losses are being carried by the state and which are in hundreds of millions of dollars over the lifespan of the carrier.

But since we are hell bent on going ahead with the project maybe we can still save the project, or at least give it a chance of success.

For starters I am not opposed to a national carrier but I am opposed to a state owned one. If we helped a private sector player set it up with minimum loss to ourselves I have no problem.

In line with that I propose a model for the new Uganda Airlines.
First of all let us recognise that starting up an airline is not like starting up a taxi company. We do not have the expertise and it would cost us hundreds of billions of shillings to bring our skills up to scratch.

Keeping that in mind it would be useful to partner with an established player, who brings the managerial competence and we provide the capital.

This would help smoothen the expected sharp learning curve and also help us feed into that airline’s existing network.

Of course our officials and representatives on the board have to be seasoned businessmen or managers who will ensure we don’t get the short end of the stick. With this model we will ensure our concerns are addressed within reason and our people and institutions will develop the capacity we need to run an airline.
In this way we share the risk with a partner who has a material interest in the airline’s success.

I shudder when I hear comments like, “Parastatals in emerging economies play a bigger, liberating role beyond balance sheet profitability” advanced by the proponents of setting up the state owned airline.

In not so few words such people are saying that the Ugandan tax payer should forgo better health and education services as a minority indulge their egos.

It also suggests that the laws of economics can be suspended because we are a developing nation.

Neither the economics nor the mathematics favour a state owned airline now.

People who have set up airlines – and we have a few in our midst, will tell you that  you would have to brace yourself for losses in the tens of millions of dollars for years before you can have a hope of turning a profit. Particularly with a none air faring population like our own. Of course the proponents argue that the reason we don’t fly more often to our villages is because of the high airfares. They are high for a reason, and a lot of it has to do with our regulatory, legal and tax regimes.

For one thing those with experience will tell you it takes a while before you get the confidence of the flying public. One way to get is to fly the plane as scheduled regardless of whether there are passengers or cargo or not. Veterans of Uganda Airlines, Alliance Air and Africa One will tell you horror stories about the crew flying virtually alone to London, Johannesburg and Nairobi and not for free, as the crew’s salaries, fuel, various fees and the aircraft’s wear and tear have to be catered for.

I would be the first one to be proud that we have a functional airline but not at the cost of more essential services, but if we must have it now let us be prudent about how we set up, if only to minimise the losses to us.

A better use of our hard earned money would be to beef up our aviation infrastructure and afford airlines better concessions to attract more traffic in and out of Uganda.



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