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Uganda Airlines stalling due to scandals and mismanagement 

By Musinguzi Blanshe
Posted on Thursday, 20 May 2021 07:55

Kenya Airports Authority staff members usher a Uganda Airlines Bombardier CRJ-900 plane during its relaunching flight to Jomo Kenyatta International Airport in Nairobi, Kenya 27 August 2019. REUTERS/Njeri Mwangi

Barely two years old, Uganda Airlines launched a few months before the coronavirus grounded flights worldwide. But insiders say the current malaise runs far deeper, with allegations of nepotism and corruption prompting experts to worry the same fate awaits this latest iteration of Uganda Airlines as hit it predecessor. Can the government pull up before its too late?

At the start of May, the minister of works and transport, General Katumba Wamala, sent home senior managers of Uganda National Airline Company Limited, which runs the state-owned Uganda Airlines. Those on the list include the company’s chief executive officer, Cornwell Muleya, who is on a 90-day suspension.

The entire company board of directors was also asked to step aside.

The minister insists that managers were not suspended but asked to take accumulated leave. It’s an opportunity to ‘test the competence of their juniors who are now in charge’, he said when asked about the rationale of sending all senior managers on leave.

And the minister has indirectly admitted that there is an investigation. “Yes, we may be taking this time to look at how they have been doing business,” he said. The minister, however, declined to divulge the nature of the probe.

So what went wrong?

The focus of the investigation is corruption and patronage as well as a fight between the management and the board of directors over who calls the shots. Sources say that the board of directors want to micromanage everything from procurement to hiring juniors, something that senior managers never warmed up to. The pushback from management triggered a schism.

Lessons never learnt

Insiders also say politicians and well-connected people were lobbying for inexperienced relatives to be employed or to win supply contracts for Uganda Airlines. At the peak of the election season, politicians who felt they had helped the airline during the revival process went knocking on the door of the CEO to ask for campaign donations.

“The current market can support an airline but we don’t have the culture and discipline to run an airline,” says Michael Wakabi, a veteran aviation industry journalist.

The airline – beleaguered by corruption, intrigue and influence peddling – is barely two years old. It took to the skies in August 2019 amid optimism that it was destined to success, months before the pandemic hit. In its infancy, the national carrier started facing management challenges that partly led to the 2001 collapse of the old airline, whose cash cow – the Uganda Airlines and Entebbe Handling Services – had been bought by Sam Kutesa, currently the minister of foreign affairs and an in-law to Uganda’s President Yoweri Katuga Museveni.

“I was among those who buried the old airline and I am among the midwives delivering the new baby. This new baby will never die,” Museveni said in 2019, after he received a first set of Bombardier jets at Entebbe International Airport.

The current predicament facing Uganda Airlines indicates that no one heeded the red-flags highlighted in a feasibility study which informed its revival. The study said “national airlines are not free to make good business decisions due to politicians interfering in the running of the airline.” Be it selection of competent board members, staff recruitment, procurement, demands for free tickets or lack of payment for tickets, politicians want to have influence.

According to the feasibility study, it’s never doom and gloom for flag carriers in Africa if “the national airline is run professionally by competent managers” and “insulated from political and other influences.”

Francis Babu, a retired flight captain says the airline adopted a wrong management model. As a start-up, it should not have begun operations with the board of directors or many top managers. He argues that the government should hire top notch consultants: a managing director as well as finance and marketing wizards to run the company. If given independence, he says, they can execute day-to-day activities with minimal staff.

“You have six planes, how do you have a board of nine people? […] All these people managing six planes. No, you don’t need all these,” he says. Babu points to the caliber of experts such as Maurice Flanagan, a British expat who founded Emirates airline in 1985. “The President should be hiring such expatriates,” he says. It should be a white expatriate, he argues, because local politicians will fear approaching him or her to solicit bribes and favours.

Profits in the first year? No

The Ugandan government plans to invest almost $400m into the revival of the airline. Uganda Airlines bought four Bombardier CRJ900 jets (for regional flights) and two Airbus A330-800neo (for long routes), and they were delivered in December and February. However, Uganda Airlines is yet to meet the standards to start long-haul flights.

It had been projected that the government would invest $70m as capitalisation and working capital in the first five years of the airline’s operations.

The feasibility study envisaged that if everything went as planned:

  • The airline would make profit of $3.9m and $7.2m, respectively, in the first and second years of operating regional flights.
  • The airline would register $6.1m loss in the third year after the introduction of international routes.
  • But it would quickly recover in the fourth year by recording $2.4m profit and a record profit of $11.9m in the fifth year.

However, the national carrier produced losses of USh102bn ($29m) in the 2019/20 financial year, according to an audit report. The next year’s results are unlikely to be any better due to the drop in air travel caused by the Covid-19 pandemic.

The profit optimism for the first year contrasts airline business reality in the region. With two decades in operation, RwandaAir has never made a profit. Other airlines in the region – Kenya Airways and Air Tanzania – have been making losses. Kenya Airways registered profit in 2012 of $18m.

South Africa’s cash-strapped South African Airways temporarily closed operations at the end of September last year, after failure to raise bailout funds of more than $500m. On the continent, it is only Ethiopia Airways that has been making profits for years.

Optimism

Though the airline is bedevilled by management challenges, former transport minister Monica Azuba Ntege – who was in charge of its revival process until 2019, when she was sacked – says it is “well placed to succeed”. Wamala, the current minister, argues that Uganda Airlines is facing “human weaknesses” like any other organisation, which will be solved soon.

But for Babu, the government must be cautious about the airline’s reputation. “Like a bank, it’s a sensitive business. An airline must have good reputation because it runs on too much credit.”

Michael Wakabi – a veteran aviation industry journalist who extensively covered the collapse of the old airline – says “the current market can support an airline, but we don’t have the culture and discipline to run an airline.”

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