The Independent Uganda: You get the Truth we Pay the Price
European national carriers too struggling
European national carriers, too, are struggling to remain operational. They are still saddled with high costs from their days as state-run monopolies but now, trying to privatize to face the high-quality, low-fare service from Persian Gulf carriers on long-haul flights.
Italy’s national carrier, Alitalia’s latest $2.5 billion bailout came from Etihad of the United Arab Emirates in 2015; TAP Air Portugal was saved by an investment group led by JetBlue founder David Neeleman during the same year through acquisition of a 61% stake and promised to inject a minimum of $355.8million into the debt-burdened carrier.
Some are still seeking buyers; state-owned LOT Polish Airlines has been on for sale for several years to follow the footsteps of British Airways and German’s Lufthansa while others including Malev, Hungarian Airlines have folded.
The United Kingdom privatised British Airways to pull itself from slump management in 1987. Now, BA’s parent company, International Airline Group, owns and operates Spain’s Iberia and Ireland’s Aer Lingus, with the respective countries acting as their hubs.
Similarly, Germany privatised its national carrier Lufthansa in 1994, which also now owns Austrian Air in Austria, SwissAir in Switzerland, and Brussels Airlines in Belgium.
This trend, however, demonstrates that privatisation and liberalisation of air transport in the mid 1980’s brought competition from low cost carriers that most state-owned carriers have failed to adapt and remain profitable.
Analysts told The Independent that the experiences of the planned revival of Uganda Airlines will not be any different with other struggling national carriers both within the region and around the globe.
George Mulindwa, a portfolio manager at Stanlib, an investment management firm in Kampala said while the government appears to have made up its mind on reviving the national carrier, it should be ready to continue injecting capital in the carrier to remain operational.
“With the exception of Entebbe-Nairobi route, the aircrafts operating on Entebbe-Kigali route are rarely at full capacity. So, we already have strong competition in the aviation industry in the region “he said.
To make the situation worse, Tanzania President John Magufuli has taken a bold step to revive the national carrier, Air Tanzania.
Currently with three aircrafts, two of which were acquired in last September, Tanzania has ordered for three more aircrafts including a Dreamliner to boost its local operations and facilitate expansion into the East African aviation market.
On the same note, RwandAir is on a rapid expansion, with its 12th aircraft expected to arrive next year to boost regional and long haul flights.
Going forward, Mulindwa says it is better for the government to complete the ongoing big infrastructural projects-Karuma and Isimba dams, Standard Gauge Railway, Entebbe Expressway, and Jinja Bridge- analyse their multiplier effect to the economy before embarking on re-establishing national carrier.
Mulindwa says subsidising an airline could increase Uganda’s debt which is already higher up.
Uganda’s public debt has increased from $7.2 billion as at the end of financial year 2014/15 to about $8 billion as at the end of last financial year and analysts warn that the cost of financing the debt is becoming unsustainable.
Mulindwa says the government should first work on improving its tourism potential and boost its agricultural sector in the next three years then embark on reviving the airline to ensure its sustainability.
Rachel Sebbudde, the World Bank economist says Uganda does not need a national carrier because it is already well connected with both local and regional airlines.
“As we are developing infrastructure, we have to be strategic…For example, if we say, we need to have a national airline, is that really the best way of reducing the cost of doing business in Uganda or there’s an alternative,” Sebbudde says.
She says there are already other airlines already serving travelers in and out of the country and can still do the same job.
