Africa: Sustaining Uganda Airlines – An Accountant’s Perspective
The euphoria around the re-birth of Uganda Airlines can be felt in nearly every periphery of Uganda. With two new aircraft already in the country, maiden commercial flights are slated for June 2019.
On the flip side, some aviation pundits have expressed skepticism regarding the sustainability of the Airline, based on previous pitfalls.
A national airline is ideal for Uganda. Its contribution to the economy cannot be overstated as it opens doors for several revenue streams. These include air navigation and airport charges levied by the Civil Aviation Authority, income for catering service providers, and business for tour operators and travel agents.
It will increase traffic to hotels especially around Entebbe and create more employment opportunities for Ugandans. There will be a substantial boost to tourism due to the direct routes to Uganda. Over the years, tourism numbers have not risen to precedented numbers, partly owing to the absence of a national carrier. The cost and inconvenience of having to change several flights in order to arrive in Uganda is a deterrent. The re-birth of Uganda Airlines, therefore, is welcome.
So what should the management of the Airline do to ensure the sustainability of this goldmine?
Recruit Professionals: Job positions should be advertised openly and offered to competent candidates. Recruitment policies for specific professionals should be adhered to. For example, accountants should have professional accountancy qualifications, such as the Certified Public
Accountants (CPA). Heads of Finance and audit should be members of the Institute of Certified Public Accountants of Uganda (ICPAU), in tandem with the Accountant’s Act Section 34 (2).
Manage Costs: Bankruptcy and corruption are the major issues that plagued the defunct Uganda Airlines. Therefore, belt tightening and ring fencing should be applied.
Ground Handling: Uganda Airlines must be allowed to self-handle rather than be handled by private operators. Ground handling costs are the heftiest in the airline business, therefore if empowered to self-handle, a substantial cost will be saved. Ground handling also avails additional income generating opportunities if the airline provides handling services for other operators.
The aircraft hangar: The national airline must have its own aircraft hangar, to enable routine maintenance checks. This saves exorbitant costs incurred in contracting external service providers. The old hanger for the defunct Uganda Airlines should be refurbished or a new one constructed.
Use the Leasing Model to Acquire Aircraft: Whereas Uganda Airlines has purchased the CRJ-900 Bombardiers for regional flights and plans are underway to purchase larger Airbus aircraft, this does not adequately position the airline to counter competition from the already established airlines plying long-haul routes.
Traffic is highest along routes to business destinations like Dubai and South Africa. Therefore, smaller aircraft become less viable, as cargo must either be shipped or placed on alternative airplanes. This creates unnecessary delays for the business folk who love to fly with their cargo.
Uganda Airlines should consider leasing rather than purchasing the larger aircraft, because leasing is a more cost effective option. In the aviation business, it is commonly said, “why purchase an aircraft when you can lease one?” If a leased plane becomes problematic you can return it and get another one from the same leasing company or other operators. What happens if a purchased plane develops a major problem that requires say a D-Check? The cost may become unbearable.
Right from the onset, we must think beyond Rwanda, Kenya, Juba and Burundi routes and do a proper route cost analysis to guide decision making. We must invest in the high traffic routes, through a cost effective model.
Establish in-house Catering: This will have a trickle-down effect, as income will be ploughed back to support Uganda’s agricultural sector and save on the operating costs.
Invest substantially in training: Training for pilots, cabin crew and ground staff is costly but a worthwhile investment, to ensure competence and reinforce confidence in safety standards.
Minimize Government Interference: One of the setbacks that the previous airline encountered was insufficient cash flow. This was exacerbated by, among others, government officials who travelled on credit but did not fulfill their obligations to clear payment on time. Tickets for all travelers must be purchased in cash or by credit card, and not on credit.
Plan for Domestic Flights: The airline should plan for smaller aircraft like a 15-25 seater aircraft to facilitate travel to Uganda’s numerous tourism destinations, and tap into the business potential in the oil rich Hoima.
By CPA Dr. Protazio Begumisa