By Enoch Twinoburyo
So today, I found students locked in a heated debate on national airline. The question was do we need it?
My deductive and quick thoughts
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Politically yes we need it but economically we don’t atleast yet.
The arguments against national airline are compelling:
1. We have a history of its failure
2. Regional aviational investments are struggling.
3. It comes at a cost of the tax payer – because in the short run even efficiently managed, it wouldn’t break even. Again we have to borrow and our numbers getting super elevated. Contracted debt is over 50% of GDP. The debt risks are getting elevated particularly because we borrow in Dollars/other foreign currencies, but earn taxes in a weaker currency UGX. Recent trend of 10% depreciation per annum not a good trend.
4. Efficient management is not our classical define. Name a single efficient run and commercially viable Gov’t entity in Uganda. Their eventual listing on Uganda stock exchange would be one indicator. Even service sector is not our niche.
5. Traffic volume – we have low numbers. If we had 3-4 Entebbe airport numbers may be. Cargo frieght also limited numbers. Trade is increasingly skewed to EAC and COMESA and thus Standard Guage Railway and other transports modes expected to suffice here.
6. Other economic benefits, like jobs created particularly in top level will be few. May be in long term, they would increase bug still marginal.
7. Where are regional thinking caps when it comes to airline? We already saturation in the region.
8. Airlines like refineries are expensive and complex.
9. We have an overload of large investments all front loaded and the risks of leakages/mistakes(costly) imminent.
10. So if an airline is viable, still the timing would have to be rethought. First we need structurally reform before a huge investment. We remain struggling with even the aviation schools. Government of Uganda is indebted to CAA and arrears were growing last time I checked. Also it would make sense to delay and develop financial sector so that we are able to raise some domestic financing off the market.Oil sector and airline linkages? -something i am yet to find out but even largest producers don’t own national airlines.
Again very quick and deductive thoughts. BUT the GoU’s own statements indicate airline is economically viable.
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