A feasibility study report has revealed that 11 reasons detailing why airlines in Africa fail and if government does not stay alert then the same predicament could again befall the revival of Uganda Airlines.
The report titled “Revival of Uganda’s National Carrier” was undertaken following a directive from the Presidential Economic Council (PEC) to the National Planning Authority (NPA) to prepare a Paper on the Revival of Uganda’s National Carrier.
This feasibility study report was signed by Prof. Wilberforce Kisamba Mugerwa, chairperson, NPA and NPA Executive Director, Joseph Muvawala. It is through the recommendation of this report that government through ministry of Works and Transport based on to undermine the current measures in revival of the national carrier.
The Study undertook a detailed review of the causes of success and failure of Airlines globally, with particular focus on Africa and the collapse of the country’s previous National Carrier. According to the report, among the challenges that could hinder the resurrection of Uganda Airlines include; Under-capitalization, use of inappropriate aircraft technology, weak capacity for airline management, failure to appreciate airline value addition to the economy, political interference in airline management, and corruption in procurement processes.
In as far as political interference is concerned; the report noted that national airlines especially are not free to make good business decisions due to politicians interfering in the running of the airline. This starts from the selection of competent Board members, to staff recruitment, procurement, selection of routes, flight operations, demands for free tickets and lack of payment for tickets, and others.
It was also noted that there is lack of technical expertise to run the airline business considering that in many African countries, management are not selected on merit and therefore unable to run a high cost low margin industry.
11 REASONS WHY AIRLINES IN AFRICA FAIL?
- Under-capitalization: where the airline is formed with minimum capital and the funds are not enough to enable it complete its intended network development. The airline therefore runs out of money before gaining the trust of passengers, travel agents, tour operators, suppliers and other airlines in the industry. The start-up phase requires substantial cash resources while the airline is establishing its credit rating across all the target airports and destinations
- Use of old technology aircraft: these are cheap to lease but expensive to run. The temptation is to use the limited capital to get cheap old aircraft from lessors with a view to upgrade the fleet later when business takes off. The problem is that business will never take off because the old aircraft will cost more in maintenance as the frequency of break down is higher, they will have a poor cabin with poor seats which will not enable the airline to compete with others who have new aircraft, old aircraft also consume more fuel causing the operating costs to be higher, leading to a downward cycle to closure.
- Political Interference: national airlines especially are not free to make good business decisions due to politicians interfering in the running of the airline. This starts from the selection of competent Board members, to staff recruitment, procurement, selection of routes, flight operations, demands for free tickets and lack of payment for tickets, etc.
- Failure to appreciate airline value addition: national airlines form part of the infrastructure that supports the economy of the country. They provide the necessary connectivity, visibility and access which attracts investments, promotes tourism, exports and imports, supports other industries like agriculture, hotels, restaurant, mining etc and also enables a country to participate in global trade and industry. African countries have been slow to recognize the power that airlines have in transforming living standards through these catalytic impacts. The example of the growth of Dubai is instructive in this regard. Sadly many African countries were in the 80s and 90s led to believe that national airlines were a burden to the economy, and did not take the time or effort to measure the benefits.
- Lack of a long term plan and strategy: airlines were started without thinking through the role and objectives to be accomplished in the economy and the long term financing and operational issues. It is easy to fail and be discouraged if you are not sure of what you are doing and why. Without a proper vision achievement would not be possible.
- Lack of technical expertise to run the business: management not selected on merit and therefore unable to run a high cost low margin industry. In addition, airline business is highly regulated requiring technical expertise in the different specializations across the operational and managerial disciplines. This has been particularly damaging for African airlines when unqualified political appointees are put in charge of such a business.
- Lack of recognition of value chain: airline operations are naturally connected to airport operations, hotels, handling business, civil aviation regulations, immigration policy, game parks/ reserves and national parks etc. Policies in one area affect the entire value chain. In Africa, the policy framework in certain areas may lag behind such that instead of promoting the growth of the entire value chain, it stifles it. Airline business thrives when policies are coordinated and in some cases when it can control certain parts of the value chain like handling, hotel, visa etc. For a national airline to establish a hub for example, it needs airport authorities to invest in a good airport terminal and runways to accommodate the traffic targets and provide facilities for the transit and other passengers. The gulf policies are instructive in this regard.
- Enabling legislative framework: aviation standards have been harmonized by ICAO at international level for all countries. Weaknesses in the legislative frameworks can stifle the growth of national airlines. Failure to upgrade civil aviation standards and oversight can lead ICAO to issue “Significant Safety Concerns” on the country which may lead certain countries and regions to refuse flights or impose a blacklist on the country. The government of Uganda is well aware of the damage on the Uganda aviation industry in 2014 when the Uganda CAA was found with deficiencies which led to the withdrawal of Air Operator Certificates and grounding of some airlines in Uganda.
- Terrorism and communicable diseases: the threat or existence of terrorism is a big risk to the survival of airlines today. Markets especially tourist arrivals could be wiped out as a result of terror attacks or threat of attack as countries will issue travel advisories to the affected regions. Recently, we also experienced the impact of the Ebola outbreak in West Africa which caused significant damage to the fortunes of carriers like Kenya Airways.
- Corruption: in procurement of aircraft and other assets and servicescauses high costs, damages reputations and leads to poor financial and operational performance leading to failure. The industry is plagued with speculators across the service chain and yet integrity and transparency are key ingredients for success of airlines.
- Orphan Syndrome: governments in some cases treat their national airlines like orphans. They support and favor foreign carriers more than their own whether it be in policies like tax incentives, or in patronage where they prefer to fly foreign rather than their own. The “feed your neighbors child instead of your own” policy leads to starvation and gradual death of one’s own child.
