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AFRICA: Open Letter To Presidents Yoweri Museveni And John Magufuli

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By David Himbara


It is widely reported that you want to establish and expand your national airlines. Apparently, Uganda is set to relaunch Uganda Airlines in November 2018 which ceased to operate in 2001. My unsolicited advice to you is that you should seriously consider other options before you invest heavily in a national airline. Building a successful airline is easier said than done.
On paper, RwandAir looks impressive


It may be tempting to follow Rwanda’s example of building what appears to be a successful airline. Indeed, RwandAir looks impressive from a distance.

RwandAir began operations in 2002 as the new national carrier under the name Rwandair Express. In 2009, the airline’s name was changed to RwandAir. Its fleet currently comprises:
Two Airbus A330
Four Boeing 737–800
Two Boeing 737–700
Two CRJ900
Two Bombardier Q-400

The airline has considerably expanded its operations. RwandAir serves twenty-two cities in western, central, eastern and southern Africa, the Middle East, Asia and Europe. The airline has also applied for landing rights in the United States at JFK International Airport, New York.

By 2016, RwandAir’s total assets stood at US$238 Million. RwandAir’s fleet, operations across 22 destinations, and total assets all seem impressive. But unfortunately there is a devastatingly gloomy side to RwandAir.
But RwandAir has a gloomy side

Excellencies, a closer look at RwandAir’s state of affairs shows us the real situation. RwandAir’s financial statements from 2013 to 2016 reveal how the airline is bankrupting Rwanda. The circumstances of RwandAir may be summed as follows:
Total assets — US$238 Million by 2016;
Accumulated losses between 2013 and 2016 — US$222 Million;
Accumulated grants from the government between 2013 and 2016 — US$192 Million;
Accumulated government loans — US$238 Million;
Accumulated loans from outside government sources — US$100.6 Million.

Let us look more closely at RwandAir’s realities from 2013 to 2016.

In 2013, RwandAir made a loss of US$48.2 Million. The government stepped in with a grant of US$54 Million.

In 2014, RwandAir made a loss of US$65.8 Million. The government had to pump into the money-losing airline US$28.4 Million. In addition, RwandAir acquired loans amounting to US$88.7 Million in 2013, and US$148.8 Million in 2014.
In 2015, RwandAir made a loss of US$53.4 Million. The government had to pump into the money-losing airline US$56.2 Million.

In addition, RwandAir acquired loans amounting to US$88.7 Million in 2013, and US$148.8 Million in 2014.
In 2016, RwandAir made a loss of US$54.8 Million. The government pumped in US$53.8 Million.

RwandAir is bankrupting Rwanda

The overall picture of RwandAir is ugly. By 2016, RwandAir had accumulated US$222 Million in losses. The government pumped in US$192 Million in grants. Additionally, the government gave the airline US$238 Million in loans, while loans from outside government were US$100 Million. This means that Rwanda government kept RwandAir afloat with US$430 Million in loans and grants between 2013 and 2016. When the US$100 Million external loan is added, US$530 Million was pumped into RwandAir between 2013 and 2016.Remember that Rwanda is a small economy with a GDP of US$8.3 Billion and a per capita income of US$702.
Presidents Museveni and Magufuli, do you really want to travel this route?

Excellencies, your countries are well-served by major global airlines. International and regional airlines connect the two countries to key destinations. What is it that national airlines will perform — which other airlines cannot do? Or is this about a desire for creating a prestigious symbol to project Uganda and Tanzania, internationally? Be that as it may, your Excellencies, do not fall into RwandAir’s trap. The airline is a disastrous experiment — it is no model for any country with a clear vision and people-centered priorities.

Air Tanzania, which is gearing up for its international debut flight as part of efforts to expand operations, narrowed its losses to $1.9 million in 2017, from $6.2 million the previous year.
Chief executive Ladislaus Matindi attributed its improved performance to intensive marketing and government support.
“Our revenue has grown sixfold from $305,660 in 2016 to $1.9 million last year, while our market share has increased to 24 per cent from 2.5 per cent when we relaunched,” he said.
The airline is expected to fly to India in September, with a possible European touchdown in 2022.
The carrier also plans to start direct flights from its Dar es Salaam hub to Entebbe next week, with a possible stopover at Kilimanjaro International Airport in Arusha.
Air Tanzania, which bought a Boeing 787 Dreamliner in July, expects a second one in early 2020, for deployment on the European route, with a possible first stop in London.
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The national carrier also said it is expecting delivery of two A220-300s from Airbus towards the end of the year, to bolster its regional routes and launch new African destinations.
“We are making these potential routes a priority due to low competition, but we are aware of the potential of European destinations. However, we are also alive to the dangers of the aviation business and especially establishing new routes, so we are cautious. We hope to breakeven in the next five years,” said Mr Matindi.
The airline is expected to start its second regional route after Comoros, with flights to Entebbe and Bujumbura, bringing competition to the doorstep of the Kenyan and Rwandan national carriers, which have over the years dominated these routes via their respective hubs in Nairobi and Kigali.
Its first Dreamliner, which has been plying the Mwanza, Kilimanjaro, Dar es Salaam routes, is expected to be deployed on the regional routes before its September flight to India.
The airline plans to start flights to Guangzhou in China in December.

—— AUTO – GENERATED; Published (Halifax Canada Time AST) on: April 14, 2019 at 04:15PM

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