Uganda Airlines posts Sh102 billion loss in first year of operation

By Christine Kasemiire, KAMPALA Uganda

Uganda Airlines grossed Sh102 billion ($27.86 million) in losses in the 2019/20 financial year, according to the Auditor Generals’ report. 

The airline, which trades as Uganda National Airlines Limited, has seen losses expand since it was revived, according to the report released last week. 

The report, which highlights the airlines’ performance in the last two financial years, indicated the national carrier posted a sharp rise in losses from Shs15b in the 2018/19 financial year to Shs102b in the 2019/20 financial year.

“The company was unable to realise its planned revenue, yet the expenditure on operations was way above projected costs. The company only realised $ 9.9m (10.8 per cent) of the project revenue of $92.8m,” Auditor General John Muwanga indicated in the report. 

The report also indicated that Uganda Airlines incurred expenses that were beyond planned costs and actual revenue with at least $29.2m spent on direct costs while $3.6m was spent on indirect costs. 

The airline, Mr Muwanga noted, had accumulated deficits during the 2018/19 financial year, which points to a risk of its inability to meet future obligations or investments.

Uganda Airlines, the report further noted, had failed to implement its business plan in accordance with the planned timelines because it (business plan) was not annualised and the timelines within which planned activities were to be achieved were not specified, which made it difficult for the  Auditor General to evaluate the progress of the same. 

Uganda Airlines was founded in 1976 but was liquidated in 2001 during a broader push to sell struggling state-owned enterprises. 

However, government in 2018 yielded to demands from various stakeholders including tourism players and National Planning Authority that had expressed frustration, especially in marketing Uganda as a tourism destination. 

In August 2019, Uganda Airlines was relaunched after almost 20 years later, banking on passengers from the emerging oil and gas industry and tourism. 

The revival plans were hinged on recommendations of a joint study by Uganda Development Corporation and National Planning Authority.

 Its projections were that Shs1.4 trillion, which they advised be borrowed from international creditors, would be good enough to get the project off the ground.

Currently, Uganda Airlines owns six planes with the most recent acquisitions being two airbuses meant for long-haul flights. 

However, the Auditor General noted that Uganda Airlines had performed dismally in using its assets to generate revenue with a score of -16.5 per cent, which was far below the acceptable 5 per cent score. 

The Auditor General also noted that the airline was found to hold the worst interest cover, which means it will find it difficult to service its loans. 

However, Mr Muwanga said Uganda Airlines was still ripe for financing opportunities since its debt ratio is still holding low at only 2 per cent but urged government to limit debt to manageable levels premised on improved profitability.

Uganda Airline was affected in 2020 on account of the global lockdown implemented to mitigate the spread of Covid-19. The airline is still navigating Covid-19 related challenges that have grossly restricted movement.   

It should also be noted that government had planned that the airline will only break even in four or five years. 

Mr Waiswa Bageya, the Ministry of Works permanent secretary, which holds the largest mandate on the operations of Uganda Airlines, at the weekend told our reporter government was optimistic that the airline will still break even within set timelines if all factors remain constant.

“Covid-19 is what really affected us. Those planes were packed for a long time and we thought they would be the one to start the business before we start international flights, but if all goes well, we are optimistic that in four or five years, we shall break even,” he said.