Three regional national airlines – Kenya Airways, Uganda Airlines, and Air Tanzania operate in loss-making areas and may continue to have financial difficulties for many years, according to analysts.
For instance, experts in the aviation industry have noted that Uganda Airlines, which has been in the headlines for the past two weeks while a parliamentary oversight committee investigated its operations, might be stuck in the losing position for decades.
According to the parliamentary investigation, the airline lost Ush164 billion ($43 million) in the fiscal year 2020–21. That number was 37 percent outside of expectations for the year. The figures that will be released for the fiscal year that concluded in June of last year are predicted to once again be 53 percent off-target.
However, according to the company’s troubled chief executive Jenifer Bamuturaki, the actual loss was Ush77.4 billion ($20 million) and not the stated Ush164 billion ($43 million), which was the book value for depreciation on aircraft.
“When you factor in the Ush14 billion ($3.7 million) that went back to the Treasury as taxes, our actual loss position comes to around Ush86 billion ($22 million),” Ms Bamuturaki told The newsmen.
She advised the nation to prepare for a longer short-run curve since new routes like Guangzhou, which is anticipated to debut in a few months, will increase expenses. London and Mumbai will follow in the first quarter of calendar 2023.
“We are riding a seesaw. Every time we launch a new route, it takes us back along the cost line because until it matures, it will be a drain on revenues from the existing routes,” she said.
The CEO forecasts a cost increase of 38% in 2023 and a cost reduction of 67% in 2022. The benefits are anticipated from a network that has been rationalized and should experience greater traffic and aircraft utilization.
Only six of the airline’s 21 routes, including three international and 18 regional, are currently in operation. With the addition of flights to Guangzhou and London, passenger numbers will likely surpass 0.5 million, having more than doubled to more than 217,000 in 201/22.
Independent analysts of Uganda Airlines claim that the company’s current financial situation is due to structural problems as well as the challenging operating environment brought on by the Covid-19 disruptions.
“It does not matter who you bring to manage that airline, it will stay in the loss position for the next 20 years until the structure of its balance sheet is addressed,” said retired airline administrator Fred Ochieng Obbo.
Recall that in 2016 KQ stopped hedging its gasoline costs after contract losses caused it to fall further into the red.
The Covid-19 pandemic had an impact on the travel sector, forcing the airline to suspend operations for several months in order to stop the virus’s spread.
As several nations, including China, restricted their airways, the need for vaccines hindered the healing process.
Despite these difficulties, KQ transported 1.61 million passengers over the time period, an 85 percent increase over the 0.87 million passengers it carried the year before.