Patrick Bitature: The good that can come out the new Uganda Airlines

I have fond memories of the Old Uganda Airlines.

As a secondary school child, I took advantage of ticket concessions (my mother worked for Uganda Airlines) to fly to the UK to buy clothes and other goods for sale to my friends at school.

These trips were a great adventure and served as a good foundation for the businessman I am today.

It has been reported that the first two planes of the revived Uganda Airlines will be landing in the country within the month. The finance ministry has been presenting to parliament their needs to pay off deposits on the first two of six planes they are to take possession of in coming months.

The project has its equal share of supporters and critics. I am a qualified supporter of the project.

In business nothing is certain. We deal in probabilities. When getting into a venture we often must weigh the risks versus the returns of a project. If the risk of failure outweighs the potential profit we stay away, otherwise you are gambling. But if the returns far outweigh the risks, we jump in with both feet.

In my mind the benefits of Uganda Airlines taking to the sky far outweigh the risks and the government and all Ugandans should back the project to the hilt….

“Uganda is abundantly gifted by nature. The question then arises that if this is an indisputable fact, then why are we still struggling as a country? There are many reasons but I believe that a major reason is that we have not yet unlocked the full potential of our natural endowments for the benefit of our people….”

The govt has been very focused on infrastructural development for the last 9 years, roads, bridges, electricity, clean water. Unfortunately, nearly always there is the typical small-time lag between investment and results, then it will certainly pay off. We can’t wait to the dividend to fully manifest, and so need to soldier on to developing our much-needed airports, national Airline and aviation services.

Look at a map of Africa, land-locked Uganda has a central location on the continent. We are surrounded in all directions by a fast-growing population that has an upward income trajectory.

Imagine if we had non-stop flights from Europe, Asia, Southern Africa, West Africa, North Africa, North and South America bringing passengers and cargo either to the country or for onward delivery to other destinations? Our tourism would boom and trade numbers would skyrocket to reflect the new convenience.

The jobs created by the airline would be the tip of the iceberg, all the supporting logistical and hospitality industries that would spring around this initiative is where the action would be. It is such infrastructure that will unlock our competitive advantage of being at the center of the continent or the world, for that matter. The old Uganda airlines that was closed in May 2001 had crossed a point of no return in the economic and social times, even the best idea at the wrong time just won’t materialize. The time to start afresh with no historical baggage has arrived.

A credible airline would inject added impetus into our fast-growing horticultural sector. We have untold potential in the growing of fruits, vegetables and flowers, unfortunately we still have some deficiencies in the sectors’ value chain, not least of all the need for expanded cold storage, and sort out the challenges faced to evacuate our produce to the markets of Europe and Middle East through frequent and consistent flights out of Entebbe. Other high value exports – like Gold that outperformed coffee as our country’s leading single export by value, would be stimulated.

Related to that other sectors in which we can quickly develop a competitive advantage are tourism, mining, agroindustry, financial services, health-tourism, making Uganda a regional education centre and ICT services hub. These indirect profits are not so obvious to show and directly relate to the airline.

I have only touched the surface of what potential a viable airline can unlock for this country.

That being said, earlier concerns I had with the project still persist.

“The airline business is a long-term commitment. I have no illusion that in the best of circumstances the airline will be making losses for a long time – recent startups like Rwanda Air that was launched in 2001 and has never shown a profit to date. Attempts to sugar coat this reality may give the treasury false expectations and they may not have the stomach to keep subsidizing this project for very long without showing a direct financial profit return.”

A close look at South African airways (SAA) is quite insightful and revealing. SAA operates the profitable airport businesses and through its subsidiaries owns Air Chefs, the profitable catering business, the ow cost carrier Mango, South African Travel centre, and south African airways technical. Then why would such an established airline fail to post a profit. Some have suggested the risk of flying to less profitable routes, high maintenance cost, poor fleet management and the occasional speculation or absence of hedging against spikes in fuel prices

The last time SAA posted a profit was in 2011. It has since made financial losses year in year out on average of a million dollars a day.

Let’s take a look at another well-established airline closer to home Kenya airways. (KQ). KQ has a fleet of 44 planes and flies to 62 destinations with approx. 5 flights a day to Entebbe. The fare from EBB to Nairobi one-hour flight is about the same as the fare to Dubai a five-hour flight. Could this be considered predatory pricing?

“Nevertheless, KQ posted a financial loss of $560 million last year. It runs a pretty good cargo business but appears to lose money on the passenger side of business. Going by the latest goings on in Kenya, it is clear that for this project to have a better than even chance of success the operations of the new airline and the Entebbe International Airport, at least, have to come under one management. Ethiopian Airlines, Qatar and Emirates Airlines all control their home airports, the handling fees at these airports have proved invaluable to the viability and sustainability of those airlines.”

Mr Patrick Bitature is the chairman of Simba group of companies. He is a prominent businessman, and chairs several Boards in Uganda and beyond.