By Abraham Kizza
KAMPALA. Government has revealed why it decided to revive the National Carrier, a week after the Uganda National Airlines Company ordered four new CRJ900 regional jets with the Bombardier Commercial Aircraft.
According to a feasibility report on National Airline obtained by the Kampala Post, the National Planning Authority (NPA) was directed by the Presidential Economic Council (PEC) to prepare and present a Paper on the revival of Uganda’s National Carrier.
NPA worked with other stakeholder institutions including Ministry of Works and Transport; Civil Aviation Authority; Uganda Air Cargo; Ministry of Finance, Planning and Economic Development; Ministry of Tourism, Wildlife and Antiquities; Ministry of Defense; Office of the President; Uganda Development Corporation (UDC) and Uganda Revenue Authority.
Why Reviving the National Carrier
The report indicates that the need for a National Carrier for Uganda was based on a number of reasons which are; the objective to enhance the country’s competitiveness by reducing the cost of air transport and easing connectivity to and from Uganda, the strategy to support faster harnessing of opportunities in the economy (tourism, agriculture and minerals, oil and gas) and the requirement to establish air transport infrastructure to meet the growing demand for air transport (passenger and cargo).
The report however mentions some of the major causes for failure of African based airlines. These are; under-capitalization, use of inappropriate aircraft technology, weak capacity for airline management, failure to appreciate airline value addition to the economy, political interference in airline management, corruption in procurement processes, among others.
“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, 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 study report shows.
It adds that 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. 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 recommended that the options of leasing aircraft should be considered after the airline has built sufficient assets for the necessary credit worthiness of the airline.
It adds that this is necessary because the airline requires capital assets (aircraft fleet or cash equity) to be used as a basis for code sharing and receiving other airline services on credit that are billed monthly.
In the case of Uganda’s National Carrier Business Plan developed in the study, a total cash equity of USD 140 million will be required to replace the option of using aircraft as the asset base.
The study revealed that currently, Uganda loses about USD 540 million annually, 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 best-case investment scenario (combined regional and international aircraft purchase) would generate a direct Net Present Value (NPV) economic benefit of USD 580 million, after taking care of all the investment and operating costs, over a 15-year period.
“Government requires to undertake full capitalization of the National Carrier during the initial years and later divest through public listing to avoid challenges of risk transfer between Government and private sector,” the study report further indicated.
The study therefore recommended that Government implements the investment option for aircraft purchase with a combination of regional and international operations that gives greatest financial and economic benefits to Uganda.
The study also recommended 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. It added that the carrier will play a critical catalytic role in tourism development and promotion, export growth, investment in various priority sectors and global networking.
Prof. Kisamba Mugerwa, Chairperson National Planning Authority, while speaking about the report said that the revival of Uganda’s National Carrier will be a key milestone towards improving the country’s competitiveness and achieving the middle-income status goal.
History of Airlines in Uganda
The table below indicates historical overview of airlines in Uganda as traced from 1943 to date according to National Planning Authority.