Exclusive with CEO: Is Air Uganda dead?

Air Uganda Chief Executive Officer Cornwell Muleya. Photo/Morgan Mbabazi 

By JULIUS BARIGABA

In Summary

• Basically no Uganda-registered airline can operate cross border, they can only operate domestic flights.
• Until we get the Air Operator Certificates in our hands, we cannot begin to make plans to restart the operation.
• Restarting, once we get the licenses back, calls for millions of dollars in new investments. We can’t avoid that.

Three airlines registered in Uganda last month lost their Air Operator Certificates following audits on the country’s Civil Aviation Authority by the International Civil Aviation Organisation. These are Air Uganda, Uganda Air Cargo Corporation and Transafrik Uganda Ltd.

READ: Air Uganda failed to meet safety requirements, aviation authority says

As the only scheduled international airline on the list, Air Uganda has suffered the most from the adverse publicity caused by the subsequent suspension of operations. We spoke to Air Uganda's chief executive officer Cornwell Muleya on what this means for the airline and Uganda’s aviation industry.

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It has been more than a month and you are still grounded. How are you coping?

It has been difficult. June 17th was the last time we were in the air. This means several things.

First, we can’t sell tickets. Second, we have had to manage a lot of passengers who were already in the system. Passengers purchase tickets… days, weeks or months ahead. Thirdly, we have fixed costs to run. And with the present inability to generate income, that’s not a very good thing. It has been difficult for our passengers because there is now a gap in the market which has not been filled since our grounding.

Exactly how do you manage passengers that had pre-booked?

There are several mechanisms. The easiest is to give refunds. People purchase tickets online from the United States, Asia, Europe and other places. So we have to work with our service providers to get refunds to them.

The difficult part is assisting passengers (who don’t want refunds) to complete their journeys, because they still need to travel. We have to work with other airlines to book them, re-route them and make sure that, as far as possible, they complete their journey.

Demand (for airline seats) is very high and the capacity is low on these routes. The other airlines are not able to accommodate everyone. That’s when prices go up. We are forced to purchase costly tickets for our passengers.

What’s the genesis of this problem?

All national airline regulators get audited by the International Civil Aviation Organisation (ICAO) in five-year cycles. The last time Uganda was audited was in 2008 so the next audit was due this year.

It is of concern to the entire industry for several reasons: First, if the regulator is good, they have the capacity to oversee, manage, supervise and inspect operators. Issues with the regulatory mechanism, the structure of the authority or legislation associated with the industry can impact operators.

Normally, if there is a problem with an operator, the regulator has the capacity to correct the problem. That is a much easier proposition to deal with. The anxiety surrounding the ICAO audit is from this larger aspect that if the authority has issues, then it impacts everybody else.

In this case, we were notified on June 17 that there were some issues arising out of the audit on the Civil Aviation Authority (CAA). I must emphasize that the audit was not on operators or airlines. In order to protect the entire industry, they had to withdraw the Air Operator Certificates (AOCs) from all airlines.

Basically no Uganda-registered airline can operate cross border, they can only operate domestic flights. So for us who are a scheduled international operator in the region, it means we were grounded.

How long is the grounding, when do you return to business?

We are not talking (of being grounded for) days but weeks, and this is causing difficulties financially and operationally. An airline, typically, has arrangements with suppliers, especially on the aircraft side. The aircraft are meant to fly. If they don’t, covenants in the contracts demand that the aircraft be relocated to a facility of the supplier’s choice so that they can make arrangements for re-inspection.

Unfortunately for us, because of those long periods of grounding, those provisions have been invoked. So we have to relocate the aircraft, which is not easy. Until we get the AOC in our hands, we cannot begin to make plans to restart the operation. Even when we get the AOC, we have to relocate (the aircraft) and start afresh. I can’t fly the next day.

We had hoped that the period [of grounding] would be short, which would allow us to remain in the ICAO structures and visible, now we are no longer in that situation.

When there is a prolonged period of grounding, the systems which we belong to as international airlines demand that we get offloaded of ICAO systems. We cannot interchange tickets with other international operators. It effectively becomes a new investment to get back in.

But as an operator, you must have detected the issues that led ICAO to question the regulator’s capacity to enforce safety standards. Did you at any one point raise these concerns?

Our focus has been to upgrade our internal systems and standards since inception so we operate at the top tier of the industry.

We met all international certifications in terms of operations, maintenance and safety. We obtained the IATA Operation Safety Audit (IOSA), which is the prime certification of all international airlines, in 2011 and just renewed it last year. It is valid for a two year period.

We became members of International Air Travel Association on May 22nd this year. We are members of the African Airlines Association as well. All these bodies require that you’ve got your IOSA certificates that make sure that your safety and security standards are at par with the rest of the industry. That’s what we have done because we believe that we should offer a service that does not compromise on any standards.

Beyond that we’ve not looked at regulatory issues. When the regulator looks at us, they will see that we apply best practices in line with our philosophy to bring high quality airline to Uganda. That’s where we stop. Beyond that, (the CAA is) a different institution and we hope they are doing that.

How then do you offset the losses occasioned by somebody else’s failure?

That’s a very difficult question. Our focus is not to point fingers but to find a quick resolution to the crisis, which is why we have worked very fast in putting in our documents for recertification.

Can you quantify the impact of not being operational all this period?

An airline of our size has a fixed cost structure that runs into millions of dollars because we have assets, the aircraft, which are expensive, we have arrangements to access airports and routes and we have staff who are internationally qualified. When you are not earning a single shilling, the damage is quite high.

Any plans at this point on how to recover?

To recover, without someone to compensate you, you have to make a new investment. This why it is not desirable to have such a long period of grounding. Before we get our AOC, we’ve got to find ways of minimising costs because those are the only things under our control.

Restarting, once we get the licenses back, calls for millions of dollars in new investments. We can’t avoid that.
 RY

Any plans at this point on how to recover?

To recover, without someone to compensate you, you have to make a new investment. This why it is not desirable to have such a long period of grounding. Before we get our AOC, we’ve got to find ways of minimising costs because those are the only things under our control.

Restarting, once we get the licenses back, calls for millions of dollars in new investments. We can’t avoid that.