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Uganda Airlines lays loss-exit plan
Uganda Airlines says it has been making some decent returns from carrying cargo. Photo / Michael Kakumirizi
What you need to know:
- Uganda Airlines losses expanded to Shs266b in the 2021/22 financial year from Shs164.6b
Uganda Airlines has said it has established “groundwork” in which it will make a return on investment by at least 2027.
The plan, Ms Shakila Lamar, the Uganda Airlines head of corporate affairs and public relations, said will enable the flag carrier to cover at least 85 percent of its operating costs.
The airline’s continuous inability to return a profit has caused its return on assets to decline by 10 percent, according to its 2021/22 financial statement.
Ms Lamar confirmed Uganda Airlines was actively reducing some of its operating and administrative costs in order to free up significant funds for running its business operations.
“We are positioning the Airline to make money for the long term. This entails expansion to new routes but getting a new route takes about three to five years. So, for the medium term, we are leveraging on cargo in form of agricultural exports and tourism receipts,” she said, noting that the airline plans to reduce expenses related to crew costs, landing fees, navigation charges, pilot training, rentals, fuel, oil, and maintenance costs over the next three years.
However, within the same period, it will pursue an expansion agenda in terms of routes that will help it to begin balancing its net assets with liabilities.
Uganda Airlines operates six aircraft on different routes, among which include Nairobi, Dar es-Salaam, Bujumbura, Mogadishu, Zanzibar, Mombasa, Kinsasha, Juba, Lagos, and South Africa.
It also runs international flights to Guangzhou, London, Mumbai and Dubai.
However, these routes have not been sufficient in terms of realising targeted revenue with only Shs141.8b realized during the 2021/22 financial year, which was far lower than the Shs348.4b it had targeted.
Ms Lamar also noted that Uganda Airlines’ inability to transfer some revenues from passengers due to limitations on foreign exchange transfers in particular countries, remains a challenge that continues to impact its financial position.
During the 2021/22 financial year, due to restrictions on foreign exchange transfers, Uganda Airlines was unable to transfer $1.2m (Shs4.7b) from Burundi. Furthermore, the Airline has been impacted by foreign exchange losses, which during the 2022/23 financial year, saw the shilling depreciate by an average of 5.1 percent to Shs3,754.13 against the dollar from Shs3,571.64.
According to the Auditor General Uganda Airlines’ loss position for the 2021/22 financial year expanded to Shs266b from Shs164.6b due to slow recovery of aviation industry from the impact of Covid-19.
“[Uganda Airlines] explained that the industry recovery from Covid-19 effects has been low and has slowed down the Airline’s expansion efforts into new markets like China. Developments like Brexit also further slowed down launch plans for London,” he said in a report for the 12 months to June 2022.
Turning profitable
Uganda Airlines now appears to be following Kenya Airways’ lead in trying to turn profitable.
Kenya Airways reported an operating profit of Shs24.5b in 2023 from a loss of Shs123b in 2022 and had boosted its search for an investor to buy a share of the airline.
Mr Allan Kilavuka, the Kenya Airways chief executive officer, said they have gone through a restructuring process where it looked out for networks, its frequency and schedules.
“We followed that so that we approach most commercially viable destinations. We also removed all excess routes,” Mr Kilavuka said, noting that the airline also increased its punctuality because it incurs significant costs in the event of flight delays or cancellations.
