Uganda Airlines dismisses Auditor-General’s debt claims

Uganda Airlines (UR, Entebbe/Kampala) has denied it is indebted as claimed in a recent report by the country’s Auditor General, saying its revenues have been 10% below budget for the six months it has been flying, despite the impact of the COVID-19 pandemic. “Uganda Airlines is fully capitalised by the shareholders and has no debts on its balance sheet. All the aircraft and other assets were paid for by cash from the shareholders. Uganda Airlines, therefore, does not have any loans or interest payments to any financier,” the state-owned carrier said in a statement. This followed after the Auditor General Report to Parliament for FY2018/19 and FY2019/20 found Uganda Airlines’ debt ratio was 2.37% as of June 2020 and -608.7 times interest cover, noting the company may have challenges meeting its interest obligations. Interest cover looks at how many times a company’s operating profits exceed its interest payable. A cover of two times and above is usually considered to be safe. The report highlighted the airline had UGX168 million Ugandan shillings (USD45,815.42) in interest financing costs on a loss after tax of UGX102.4 billion (USD27.4 million) for FY2019/20. According to the Auditor General, the company was unable to realise its planned revenue, yet the expenditure on operations was way above projected costs. The company had only realised USD9.9 million (10.8%) of the projected revenue of USD92.8 million. It said the carrier had incurred expenses that were beyond the planned costs and its actual revenue. It had spent USD29.2 million on direct costs and USD3.6 million on indirect costs, as a result incurring the net loss of USD27.4 million in the year. The report further highlighted that the airline’s business plan was not implemented in accordance with the planned timelines. Whereas the government had invested a total of UGX 934.8 billion (USD254 million), only an amount of UGX200 million (USD54,530.42) was shown as share capital in the company statements, the rest of the amount was shown as share application funds. In a “fact check” statement, Uganda Airlines explained the UGX102.4 billion loss during FY2019/20 had been due to lack of activity due to the grounding of its aircraft because of the country’s COVID-19 lockdown. A further UGX15 billion loss in FY2018/19 had been incurred during the pre-operation period from January 30, 2018 to June 30, 2019, when the airline had just been incorporated and was investing in its set up activities and was not flying. It had not yet obtained an AOC in order to mount flights and open routes. “The costs of investing in aircraft, purchasing tools and equipment, setting up and performing all the activities needed to secure licences, skills, competencies, and systems are what is recorded for this period.” “Purchase orders for both aircraft types in the plan, (four CRJ900LRs and two A330-800Ns) were placed during this period and deposits paid, so that the manufacturing processes could begin. Aircraft manufacturing and assembly takes a period of one year for the regional CRJ900 aircraft and two years for the widebody A330s,” the airline said.