Gov’t Could Abandon Plan To Revive Uganda Airlines

Gov’t Could Abandon Plan To Revive Uganda Airlines

Government is about to abandon its plan to revive Uganda Airlines because of a severe lack of money to activate the project.

The minister of Finance, Mr Matia Kasaija, was quoted in the media saying that having Uganda Airlines flying again was no longer a ‘TOP PRIORITY’ given the current economy situation.

Kasaija said: “We don’t have money for it right now. We have already reached our borrowing limit.”

Government needs about USD400m to acquire a minimum of six planes on lease, according to estimates by the National Planning Authority (NPA), which, together with ministry of Works, were tasked with having the project activated.

USD400 is about Shs1.5trillion by todays exchange rate and the government has mooted the idea of borrowing the money from Chinese and other banks.

Opinion is split on the viability of the airline project with several technocrats doubting the business sense of the project and others wondering whether its was worth the pain to borrow money to establish a venture that is unlikely to make money for the country.

Regional airlines in East Africa like Ethiopian, Kenya Airways and Rwanda Air have been racking up losses every year.

A white paper has been submitted to cabinet but the government has a severe cash shortage and in an economy that badly needs a stimulus, its doubtful if the cabinet will go ahead to debate the Uganda Airline project anytime soon.

The white paper details the options available to kickstart the project. One of the options is to borrow money and have the airline run by the government, the other option is to have a Public Private Partnership and the third option is whether to bring in an investor to run the airline with the Uganda Airlines name.

Experts doubt the government has the capacity to run the airline and also doubt whether Uganda can attract an investor operate an airline business from Entebbe.

Experts think the only possible option is a PPP arrangement with the government borrowing to secure the planes and an investor bringing in the expertise. ‘But this too would need the government to make many concessions to the investor and one is the ground handling rights at Entebbe and overing him tax exceptions.