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The board of the struggling Air Uganda has decided not to return the national carrier to service, blaming actions by the civil aviation authority and the resultant financial and reputational damage to the business.
Also thrown out was a proposed partnership that would have seen the government get equity in the airline in lieu of reviving the carrier which was liquidated 14 years ago.
The EastAfrican has learnt that, barring a positive outcome from high-level negotiations, the business case for Air Uganda, which was just five months short of its seventh anniversary before hell broke loose on June 17, has changed so radically over the past three months that a return to service is not viable.
It is understood that in the letter, which was partially a response to another of August 21 in which Mr Byandala turned down the Air Uganda board’s five per cent equity offer to the government free of charge, the carrier says actions by the CAA and current circumstances had altered the plan for the business.
According to the board, the CAA’s decision to withdraw the carrier’s Air Operators Certificate on June 17 citing safety concerns, the prolonged grounding and the takeover of its routes had caused “massive financial and irreparable damage to the reputation of Air Uganda and therefore the board sees restarting as unviable.”
More significant for Air Uganda was that withdrawal of the operator’s certificate led to automatic loss of membership to the IATA clearing house as well as the coveted and expensive IATA Operational Safety Audit (Iosa) accreditation it had attained just a month earlier.
Last week, Air Uganda also formally handed back its offices at Entebbe International Airport to the CAA. The airline had earlier surrendered its sales office in Kampala to new entrant flydubai, which inaugurated services between Entebbe and Dubai on September 30.
This communication came just as Air Uganda and CAA had completed the most critical stages in the recertification process.
Air Uganda’s international operating licence was withdrawn alongside those of three other airlines on the Ugandan register, for a while making flights out of Entebbe to regional destinations such as Nairobi and Juba the most expensive segments to travel in the world.
The CAA withdrew the certificates after it updated its procedures, informing the operators of the new regime just days before the suspensions and, according to sources, in his August 21 letter, Mr Byandala regrets these actions by the air transport regulator.
As part of efforts to manage the resulting falling-out, the regulator proceeded to issue routes previously operated by Air Uganda to competitors such as RwandAir, Ethiopian Airlines, Fastjet and, more recently, flydubai.
Kenya Airways, which remained unchallenged on the Entebbe-Nairobi segment, added a frequency and also up-gauged the aircraft operated on some of its services to Uganda.
Commenting on the developments, Air Uganda chairman Mahmood Manji said it did not make sense anymore to continue incurring costs when they were not operating. He added that resuming services “was as good as starting a clean-sheet airline as it would require tens of millions of dollars,” hence the decision to wind up.
Continue paying for overheads
According to independent sources, besides overheads such as rent and salaries for the skeleton staff that had been retained, the carrier continued to pay monthly lease fees for its fleet of three aircraft parked at Paris Orly Airport in France.
Speaking to The EastAfrican on the sidelines of flydubai’s inaugural service to Uganda, Mr Byandala explained that the government could not participate as a minority in the proposed joint venture with Air Uganda because international rules meant the resulting airline could not be designated as a flag carrier in Bilateral Air Services agreements.
Furthermore, he said, Uganda needed to have control of the board to ensure that the carrier fulfilled national priorities such as mounting long-haul routes that may be strategically important but not attractive to a private investor.
In exchange for a five per cent shareholding to Uganda gratis, the Air Uganda board had desired that all public servants to use its services whenever they travelled to the airline’s destinations and that the company regains the designation of Uganda’s national carrier.
The East African
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