Michael Wakabi/KAMPALA
South African Airways (SAA) has scrapped plans to buy 49% of Uganda Airlines, claiming that delays in the latter's privatisation have affected its value.
SAA executive vice-president William Meaney says his airline took the decision after commercial realities in Uganda changed markedly during nearly a year of talks over its investment plans.
There were also disagreements over the management structure for a proposed joint venture airline merging the Ugandan carrier with SAA subsidiary SA Alliance (formerly Alliance Air) and Alliance Express Rwanda.
"SAA has invested an enormous amount of money in trying to reach agreement with Uganda," Meaney says in a letter to Ugandan privatisation minister Manzi Tumubweine. "It is clear the agreement cannot be reached on certain items which are extremely important to us to enable us to manage and operate the airline according to sound business principles."
Sources close to the talks say SAA pulled out after increasing liberalisation changed market conditions and the scope for competition. Kenya Airways dominates the lucrative Entebbe-Nairobi route, while other carriers have won landing rights for services to the Middle East and UK.
Another sticking point was Kampala's rejection of SAA's plans to fold the liabilities of SA Alliance into the joint venture carrier. SAA may also have been discouraged by a planned meeting of shareholders in Alliance parent African Joint Air Services (Uganda, Tanzania, their flag carriers and SAA), which was expected to join an open skies agreement reached by African states last August. This would remove certain route privileges enjoyed by Alliance.
An earlier SAA takeover was called off last September after the Ugandan parliament intervened. Kampala's options are now limited to re-tendering the carrier or liquidating it.
Source: Flight International
