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UGANDA AIRLINES: Minister Reveals When Deal Was Mooted, Financed & How Planes Will Operate

Uganda’s Minister of Works and Transport, Monica Azuba Ntege has revealed how the idea to restore the national carrier was born, how it was financed and its operation schedule.

The minister made the revelation on Wednesday in an address to the media on the status the ‘revival of Uganda Airlines.’

“After months of negotiating with possible lenders, government in February 2019 decided to finance the airline (both the operating capital and the aircraft acquisitions) from internal funds,” Azuba said of the funding of the project that begun in 2017 when cabinet approved a business and implementation plan for the, Uganda National Airlines Company Limited.

The East African country is on cloud nine with the expected arrival of the nation’s two Bombardier CRJ900 ‘birds’ from Bombardier on April 23.
Commercial Flights will begin in July, 2019.

She added, “The airline will also be required to complete flight tests on the routes to be operated with its crews to meet the minimum hours for issuance of the Air Operator Certificate and validation/ endorsement of the crew licences as per the regulations.”

She also revealed that government had made initial payments for A330-800neo aircraft expected from Airbus in 2020/21.


Minister of Works & Transport Monica Azuba (L) addressing the media on Wednesday

Azuba announced that she is flying out of the country to join an inspection team at Bombardier as they prepare to delivered the long awaited planes.

Below is her full statement

On 22nd December 2017 Cabinet approved a business and implementation plan for the, Uganda National Airlines Company Limited (with the trade name Uganda Airlines). The company was incorporated as a limited liability company, under the Companies Act 2001, on 30th January 2018.

This choice for incorporation was to allow for an eventual listing and floatation of shares to the public. Establishing the company under an Act of Parliament would make it a statutory Corporation with no avenue for public listing as previously envisaged. The name of the airline was proposed and registered as Uganda National Airlines Company Limited in order to avoid any encumbrances arising out of liabilities of the previous national airline (Uganda airlines) as was approved by cabinet on 22nd December 2017.

At registration, government was advised by the Uganda Registration Services Bureau (URSB) that the name “Uganda Airlines” was available for use by Government. And it is against this background that the airline is trading under that brand name. On the date of incorporation, 30th January 2018, the authorised share capital of the company was specified as UGX 200,000,000 comprising 2,000,000 shares of UGX 100 each. These shares were to be allotted on a basis of 50:50 to the two shareholders after capitalisation.

At the time of incorporation only two shares were allotted to the two ministers, leaving the other shares for future allotment which is a normal practice in business pending capitalisation of the company. The allotment of these other shares of the company was completed on 11th July 2018 when the share allotment Form 20 giving 1,000,000 shares to the Minister of Finance and, 1,000,000 shares to the Minister of Works and Transport was filed with the registrar of companies.

FINANCING OF THE PROJECT

Several financing methods were being evaluated and these included options for (i) domestic financing and (ii) financing from international lenders. The focus was to confirm the required external financing for aircraft purchases as envisaged in the airline Business Plan.

In July 2018, the first instalment of the airline’s operating capital (UGX129 Billion or approx. US$35M) was released to the company by the Ministry of Finance. USD 29.9M of this allocation was used to pay aircraft deposits to bombardier and Airbus in order to enable signature of the aircraft purchase agreements and allow for the start of the aircraft manufacturing processes. USD5M was left as operating funds.

After months of negotiating with possible lenders, government in February 2019 decided to finance the airline (both the operating capital and the aircraft acquisitions) from internal funds. The best mechanism was to obtain funds through “supplementary allocations” from Government Budget. This required that a request for these funds totalling UGX283 Billion be passed through a Parliamentary resolution accordingly. The funds were approved by parliament on 29th March 2019. I would like to confirm to fellow Ugandans that delivery payments for the first two CRJ900 aircraft for the manufacture and assembly of Uganda Airlines’ first two Bombardier CRJ900 aircraft with Serial Nos. 15457 and 15461 has been completed.

We have made our final payment of USD41.55M to Bombardier. Additionally, the airline made the payment of USD20M on 5th March 2019 to Airbus being the agreed deposits on the two A330-800neo aircraft, so as to confirm the contracted delivery slots for these long-haul aircraft of 2020/21. It is important to note that all aircraft being purchased are brand new and would be received straight from the assembly lines of the two manufacturers.

The acceptance team from Uganda Airlines is already at the Bombardier facility carrying out the final aircraft inspections and tests. The tentative arrival of the two aircraft in Uganda is 23rd April 2019. An arrival ceremony is therefore being planned to mark the arrival of these first two aircraft in the country on 23rd April 2019.

WHAT HAPPENS AFTER THE AIRCRAFT ARRIVE?

It is important to note when the aircraft arrive they will not immediately start commercial flights due to the following:

Completing the Air Operator Certification (AOC certification) process: This a mandatory process and for it to be effected that the aircraft are required to enable completion of the company’s AOC certification process with the Uganda Civil Aviation Authority. This process has five phases and will take approximately 90 days to complete setting the timeline for start of commercial operations to be July 2019. This process includes demonstrating (to the satisfaction of the CAA) that the airline has proper operating premises, trained staff, maintenance providers, tools and equipment as well structures, processes and systems to enable the safe and secure operation of international commercial flights.

The airline will also be required to complete flight tests on the routes to be operated with its crews to meet the minimum hours for issuance of the Air Operator Certificate and validation/ endorsement of the crew licences as per the regulations. Commercial airline operations can therefore only start after completion of these processes and issuance of the AOC. However, during this 90-day certification process, Bombardier will be showcasing the CRJ900 new cabin to other countries across Africa as a marketing strategy because the aircraft we have purchased are the first in the series to have the new cabin enhancements. Uganda Airlines will be the first airline in Africa to operate them.

Once the AOC process is completed, the national carrier will need to be designated to operate to other countries as per the provisions of the Bilateral Air Services Agreements (BASAs) concluded between Uganda and the other contracting states. Currently Uganda has signed forty-seven (47) BASAs with other countries which will need to be activated. Designation is accomplished by the Aeronautical Authority (Minister of Works and transport) notifying to her counterpart in the other contracting States through diplomatic channels.

Other key activities to be completed within this 90 day include;

  • the acquisition and transport of aircraft spares
  • the purchase, implementation and testing of airline systems
  • airport services contracting at all destinations across the network
  • supplier contract negotiation for operational services, fuel, catering, technical handling etc.
  • branding and uniform design
  • set up of commercial offices and distribution network including airline association memberships
  • final online system design and roll out of booking systems and payment gateways. These activities were awaiting allocation of project finances accordingly which funds have been approved.

I am travelling with a team from the Ministry of Works and Transport, and Uganda airlines to conclude ceremonial matters and flag off the aircraft to Uganda. I thank you all for coming, I believe I have answered most of your questions in this status update and will therefore take only five questions from the media.

Thank you.

FOR GOD AND MY COUNTRY

Monica Azuba Ntege

MINISTER OF WORKS AND TRANSPORT

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