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An accountant’s perspective on how to sustain Uganda Airlines

The euphoria around the rebirth 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 July 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 rebirth of Uganda Airlines, therefore, is welcome.

So, what should the management of the airline do to ensure the sustainability of this goldmine?

1.  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 Accountants Act, 2013, section 34 (2).

2. Managing costs: Bankruptcy and corruption are the major issues that plagued the defunct Uganda Airlines. Therefore, belt tightening and ring-fencing should be applied.

(a) 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.

(b) 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 hangar for the defunct Uganda Airlines should be refurbished or a new one constructed.

(c) Use the leasing model to acquire aircraft: Whereas Uganda Airlines has purchased the CRJ900 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.

(d) 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.

3. 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.

4. Minimise 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 fulfil their obligations to clear payment on time. Tickets for all travellers must be purchased in cash or by credit card, and not on credit.

5. Plan for domestic flights: The airline should plan for smaller aircraft like a 15-to-25-seater aircraft to facilitate travel to Uganda’s numerous tourism destinations, and tap into the business potential in the oil-rich Bunyoro.

The author is the immediate past president of the Institute of Certified Public Accountants of Uganda (ICPAU).

Comments

+1 #1 Kirya 2019-05-17 22:22
What about the customers?

How do you convince me to fly Uganda Airline instead of the other carrier?

The other part is for the management to know the product. If m7 is going to micro manage the airline it is going to fail and require the like of Bob Wine to step in!!
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0 #2 rubangakene 2019-05-21 21:35
What Uganda Airlines needs is to "put more bums on seats" and charge less for those bums on seats.

Indeed you will need accountants to work in the same office as the maintenance planners and route schedulers to achieve any profitability.

As this airline will fly short sectors with few craft, they won't break-even easily ("flying into zero visibility"). For each bum put on seat, the cost of two highly paid pilots, two engineers, ground crew/equipment, cargo handling, cleaners, catering, fuel, insurance, landing fees, route navigation charges, tear and wear considered per flight will count for nothing, nix, zilzch, zero, just a pie in the sky!
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