A year after Air Uganda collapse: Half-truths tale

Friday June 19 2015

An Air Uganda aircraft at Entebbe International Airport. Photo/MORGAN MBABAZI

An Air Uganda aircraft at Entebbe International Airport. The airline folded in 2014 following suspension of its licence. FILE PHOTO | MORGAN MBABAZI 

By TEA Special Correspondent

Around this time, Air Uganda would have celebrated eight years of operation in Uganda. However, its wings were clipped after Civil Aviation Authority (CAA) had the airlines’ International Operator Licence withdrawn last year.

The saga, which lasted almost a month, capped the eventual exit of the carrier by the end of August 2014. A letter written on June 17, 2014 by CAA indicated the International Civil Aviation Organisation (ICAO) had found the carriers’ certification process irregular in an industry that was low on surveillance and less compliant to international requirements.

Thus, Air Uganda, just like other local airlines, according to CAA, had failed the audit and could not continue to operate, requiring Air Uganda to consider going through a new recertification process. Results of the ICAO audit only became available to the public in December 2014; four months after Air Uganda had folded.

Although the audit makes no mention of any particular airline, it made several recommendations, among them, dealing with inconsistencies in CAA’s regulatory oversight.

“CAA should strengthen the internal audit and quality assurance section with the necessary techniques and technical skills to enable it effectively perform its function including audit of the directorate of safety, security and economic regulation,” the audit reads in part.

The audit also found CAA’s aviation, certification and regulation to be below the global requirement of 66.45 per cent, considering that Uganda was rated at 45.45 per cent.

Compared to regional authorities, including Kenya and Rwanda, which are rated at 77.27 per cent and 68.28 per cent, respectively in terms of effective regulation, airlines certified by CAA had been considered risky for travellers and industry trends.

Crash landing

CAA is also below the global average in terms of effective licensing, operations and air navigation services. The Authority, however, did score above the global average in airworthiness, organisation and aerodromes.

In a communication to MPs regarding the suspension of Air Uganda, the then Works minister Abraham Byandala insisted the carrier was towing a dangerous line, including incidents of near misses and crash landing.

Additionally, Mr Byandala said the airline had been warned to adhere to safety procedures, among which was failure to provide fleet maintenance documentation.

“The above irregularities presented a significant gap in safety assurance process within Air Uganda,” Mr Byandala said then. Byandala’s argument continues to be shared by CAA, with the Authority maintaining it had no option but to suspend Air Uganda operations.

“With incidents recorded on a regular basis and manuals and procedures irregularly altered, CAA had no choice but to withdraw the airlines Air Operator Certificate. The deficiencies were compounded by the results of an inspection of the Airline’s Maintenance Organisation (AMO) that was also found wanting,” Rama Makuza, the CAA managing director told this reporter.

Subsequently, Air Uganda ceased operations, laying-off more than 200 staff in its commercial and handling business. Cornwell Muleya, the then chief executive officer, rubbished CAA’s claims, maintaining the responsibility to file maintenance and incident reports was not Air Uganda’s business since they were using leased aircraft.

He further said Air Uganda they could not risk their reputation in a highly regulated airline industry, insisting CAA was to blame for failing to properly file industry audits as well as conduct its oversight roles as recommended by ICAO.

All locally licensed airlines were suspended meaning they did not meet international standards. Before quitting, Mr Muleya saw through the sale of Air Uganda assets, debts, including shareholders equity and informed shareholders of the decision to fold the Uganda venture.

Daily operations

Wolfgang Thome, a contributor with the travel news site - r-turbo, vocally criticised CAA’s decision to suspend Air Uganda and other airlines, faulting the authority for the woes afflicting Uganda’s aviation sector.

For instance he said Air Uganda could not afford the luxury of spending a day grounded since operating the airline business includes huge overheads. A day without operation for an airline can result into huge losses considering many contracts are pegged on the company’s daily operations.

The situation could not be helped, given that Air Uganda was yet to turn into a profitable venture in its seven years of operation.

Negotiations between Uganda Civil Aviation Authority and the Aga Khan Fund for Economic Development, the majority shareholders in Air Uganda, which had been initiated in September 2014 to discuss the revival of Air Uganda, collapsed with the airline saying it would be hard to effectively operate, considering the huge loses incurred and the massive reputation damage.

Experts estimate the airline to have posted more than $500 million (based on the current forex exchange rates) in losses before fully closing down in August 2014. The exit of Air Uganda opened talk of reviving Uganda Airlines, a government-owned airline, which was liquidated in 2001.

In several Cabinet meetings last year, this newspaper understands the Ministry of Works and Transport vouched for the revival of the national carrier with a view of buying shares in Air Uganda.

However, a paper, which was presented on the matter then, was sent back for reviewing, especially in the area of cost implication but many of the suggestions have been overtaken by events, among them the closure of Air Uganda. Other options, including finding joint venture partners or a go-it-alone option (100 per cent funding) had been discussed but, no conclusion has been reached yet.

Reviving the national airline is also being supported by tourism sector with stakeholders such as Uganda Tourism Board, National Planning Authority and traders, saying it will help to market the country.

Up to now, many have been and continue to ask why Air Uganda never sought legal redress but the answer is grounded in the fact that the airline would be required to go through the recertification process and then proceed to court.

Another argument was that if Air Uganda or any other airline had any dispute it would be resolved through a tribunal, which CAA has never set up. The CAA Act provides that all disputes in the airline sector shall be settled in a tribunal set up by the Authority.

After Air Uganda had exited the aviation scene, its routes were temporarily granted to Ethiopian Airlines and RwandAir.

The exit also had a knock-on effect on ticket fares with Kenya Airways almost tripling its return ticket from Entebbe to Nairobi, Kenya. A return ticket to the Entebbe-Nairobi route on Kenya Airways which had spiked to almost $800 after the closure of Air Uganda has since dropped to $300.

Mr Francis Kamulegeya, the managing partner at PricewaterhouseCoopers Uganda, is cautious of the move to revive Uganda Airlines, saying it might not be a major priority for government currently.

Maintenance base

“The debate is still out there. We have to first ask why Uganda Airlines collapsed? Since we are expanding the airport, do we attract more international airlines or do we start our own and fly to those various destinations?” He said.

The cost implication, if the revival was to be taken up would be high, considering that government has just secured a $350 million loan from China’s Exim Bank for the expansion and rehabilitation of Entebbe International Airport.

“If government were to embark on forming a national airline again, against broad counsel against doing so, they would need to recruit a team of proper experts to set it up, and then inject at least $200 million to acquire the right sized aircraft, set up a maintenance base in Entebbe and start operations,” Wolfgang Thome pointed out.

In the 2015/16 Budget read last week there was no mention of any plan pointing to the revival of the national carrier.