THE OPPORTUNITIES AND CHALLENGES OF AIR TRANSPORT IN UGANDA
BY MICHAEL WAKABI, SPECIAL CORRESPONDENT EAST AFRICAN NEWSPAPER
After a string of recent failures, the news of another startup barely elicits any excitement in the average Ugandan. This attitude is partly informed by the dominance of our skies by well established foreign carriers which has created the impression that the market is too difficult to penetrate. Add to this the high mortality rate of indigenous efforts and the view is sealed, even among the political elite, that the time is long gone when Uganda could have a foothold in its own air transport industry.
A quick count shows that in the six years since 2001 when the government decided to wind up flag carrier Uganda Airlines no less than three attempts have been made at setting up a mainline carrier to fill the void left by Uganda Airlines. Two of these efforts- Africa-One and East African Airlines, involved significant local participation but foundered within a couple of years of taking to the air. The former, launched in May 2002, folded after only 10 months of operations while the latter finally bowed out in early 2004.
In November 2006, Victoria International Airlines-Uganda in which the Ugandan state has a 20 percent equity partner launched services but folded six weeks later having carried some 2234 passengers during that period.
Yet, despite this string of failures, there is a silver lining in the cloud. The major variables for establishment of a Ugandan carrier remain largely positive and market figures tell a promising story. Arrivals into Uganda have consistently grown at an average 20% per annum over the past decade and passenger traffic through Entebbe is expected to cross the one million milestones in 2008.
The economy continues to post positive growth and the recent confirmation of oil deposits in the country will not only accelerate economic expansion but will also lead to increased business travel into and out of the country. Mechanisms for resolving regional threats such as insecurity and political instability are in place and appear to be working.
The million dollar question is why have recent attempts at establishing a Ugandan carrier failed? In my view, the answer lies in capitalization and skills levels as well as the strategy preferred by the entrants. It is significant to note that while Africa One appears to have been adequately capitalized, the equipment choice was wrong for the market. Exposure to foreign carriers and recent aviation disasters have made the Ugandan frequent flyer not only safety conscious but also equipment savvy.
That brief history suggests that with sufficient funding, the right managerial skills and appropriate equipment, a carrier like Air Uganda has an opportunity to play a significant role in rationalizing and developing air transport in Uganda.
The foremost expectation of the traveling public would obviously be fares that give value for money, more convenient frequencies and choice in the marketplace. Ours is market that has been abused, overexploited and Air Uganda will be under significant pressure to demonstrate that it can deliver good services at a reasonable cost to the user.
The current price structure in the industry further buttresses the case for a Ugandan carrier. At $360 for an economy class ticket, the Entebbe –Nairobi segment qualifies as one of the most expensive sectors to fly in the world. Although air travel at current fares creates the impression that the point to point market is small, it is quite possible and it would be the duty of Air Uganda to build new traffic through deliberate product development.
Another major challenge for a new entrant like Air Uganda lies in dealing with local perceptions about aircraft types. Because their exposure to the MD family begun with very old examples, it will be difficult to sustain the business if one launched with aircraft that look old to the eye. Uganda is a small country where word of mouth tends to travel rather fast and to influence buying decisions. Getting more recent examples of the MD family could help change perceptions but in the long term it could still be a losing proposition.
As a Ugandan, having a home grown carrier is important to me for a number of other reasons. Besides national pride and projection of the country brand, it also enhances our sense of independence through the flexibility it brings in responding to emergent situations. Finally, Uganda is sitting on the edge of a major breakthrough. Air Uganda is one of the missing pieces of the puzzle.