Air Uganda is looking to expand into new markets while reducing capacity on loss making routes as the eight-month-old carrier struggles to cope with rising fuel prices.

Other measures that the carrier, which suspended its morning flights between Entebbe and Nairobi in mid July, is undertaking to stay afloat, include increasing services on the lucrative Juba-Dar es Salaam route as well as applying for traffic rights to Kisangani in the Democratic Republic of Congo.

Air Uganda chief executive Peter de Waal told The EastAfrican he will concentrate capacity on those routes where there is business and shrink operations on less viable routes to conserve resources.

“You cannot just sit back and do nothing in this kind of situation, because if you don’t, you make losses,” he said. “You have to be realistic and decide whether you are going to fly a 100-seat aircraft at a loss for the sake of it or do the right thing and protect the company.”

Matters were complicated further when the market tilted towards overcapacity on the Nairobi route following the entry in March of low-cost carrier Fly540 with a morning and evening flight.

Riding on the comparatively lower operating costs of its propeller aircraft and a no-frills model, the Kenyan entrant knocked about $60 off the return fare,t the full-service Air Uganda could not match on its jets.

Prices of jet fuel at Entebbe have reached $1.17 a litre, even as the Uganda Civil Aviation Authority says it has no relief plans for a crisis it sees as external.

Mr de Waal said the morning flight to Nairobi had to be suspended in favour of increasing frequencies to Juba, where load factors had reached 65 per cent, and Dar es Salaam and Kilimanjaro, which were running at 52 per cent.

Although suspension of the morning service meant a 50 per cent reduction in capacity, the evening flight was more promising, at a 39 per cent load factor.

This is expected to near 50 per cent when a planned code-share agreement with Kenya Airways materialises.

Sources said Kenya’s flag carrier has completed a technical and operational safety audit of Air Uganda as a prelude to a code-share agreement between them.

“I think Kenya Airways can offer us capacity and we can offer them capacity, which would be good for everybody,” Mr de Waal said.

This confirmed that consolidation of the Entebbe-Dar es Salaam route, where Air Uganda is operating flights on behalf of Air Tanzania, had worked well for both carriers.

Air Uganda has also filed plans for a thrice-weekly service between Entebbe and Kisangani, whose commencement date is subject to the approval of proposed amendments to the Bilateral Air Services Agreement between Uganda and Congo.

Kisangani is not covered under the existing Basa between the two countries, but Ugandan authorities are seeking permission to allow Air Uganda to operate the service.

The new route is crucial to the carrier in terms of maximising utilisation of its fleet of two MacDonnell Douglas-87 aircraft, the second of which joined the fleet only three weeks ago.

Although the carrier has undertaken other measures, including fuelling in places like Dar es Salaam where fuel is cheaper by two US cents, and reducing internal costs such as communication and staff travel, analysts agree that expansion and growth are the only viable alternatives for the carrier.

The airline cannot declare staff redundancies because its current human resource capacity is the minimum structure allowed by the International Civil Aviation Organisation.

Industry sources say that Air Uganda can do better if it expands its fleet by another two aircraft as these would require only minimal additions to the existing head count, mainly of flight crew.

“Accelerating growth and network expansion makes sense in our situation because carrying more passengers would put us in a better position to deal with our fixed costs,” Air Uganda commercial director Vittorio Scabia said.

“Variable costs are more of a challenge now, because they are tied to the volatile oil market, which we are trying to manage through fuel surcharges although even these have a limit before you put passengers off air travel,” he added.

Mr de Waal, however, says route development will have to be more cautious because the current market conditions mean that the waiting period for routes to West Africa, which the carrier has anticipated, will be up to three times longer before the breakeven point.