Canada ‘pulls out’ of fund­ing deal for Uganda Bom­bardiers

The credit agency first asked for a two-week ex­ten­sion to de­liver the term sheet

The East African - - FRONT PAGE - By AL­LAN OLINGO The Eastafrican

Uganda Air­lines’ plan to take to the skies by April 2019 has run into an­other hur­dle af­ter the Ex­port Devel­op­ment Canada (EDC), which had com­mit­ted to fund­ing the ac­qui­si­tion of its de­but Bom­bardier fleet, pulled out of the deal cit­ing “com­mer­cial rea­sons.”

The Ugan­dan na­tional car­rier had in July an­nounced a part­ner­ship agree­ment with Bom­bardier for the pur­chase of four CRJ-900S which were to be de­liv­ered from Jan­uary 2019, to be used in its re­gional op­er­a­tions. But the EDC, which had com­mit­ted to give Uganda $108 mil­lion for the pur­chase of the air­craft, pulled out of the deal a fort­night ago.

“Uganda’s Trea­sury of­fi­cials have al­ready re­ceived EDC’S com­mu­ni­ca­tion on their new po­si­tion, through diplo­matic chan­nels,” a source told The Eastafrican. An­other source with knowl­edge of the mat­ter said that the Cana­dian lender said it was re­struc­tur­ing and asked for two weeks to de­liver the term sheet to Uganda Air­lines.

A term sheet spells out the terms and con­di­tions of a loan as well as the sched­ule for re­pay­ment.

Shel­ley Maclean, the prin­ci­pal ad­viser for ex­ter­nal com­mu­ni­ca­tions at the EDC, told The Eastafrican that the lender had not com­mit­ted any fi­nances for the Ugan­dan trans­ac­tion. “We were ap­proached for fi­nanc­ing sup­port, but we are not par­tic­i­pat­ing in the trans­ac­tion,” she said in an e-mail.

By AL­LAN OLINGO

Uganda Air­lines' plan to take to the skies by April 2019 has run into an­other hur­dle af­ter the Ex­port Devel­op­ment Canada (EDC), which had com­mit­ted to fund­ing the ac­qui­si­tion of its de­but Bom­bardier fleet, pulled out of the deal cit­ing “com­mer­cial rea­sons.”

The Ugan­dan na­tional car­rier had in July an­nounced a part­ner­ship agree­ment with Bom­bardier for the pur­chase of four CRJ-900S which were to be de­liv­ered from Jan­uary 2019, to prop-up its re­gional op­er­a­tions.

The EDC, which had com­mit­ted to ex­tend $108 mil­lion to Uganda for the pur­chase of the air­craft, pulled out of the deal a fort­night ago.

“Uganda's Trea­sury of­fi­cials have al­ready re­ceived the EDC com­mu­ni­ca­tion over their new po­si­tion. This was done through the Cana­dian diplo­matic chan­nels,” a source told iden­ti­ties at this time be­cause eval­u­a­tion process is on­go­ing, end­ing this week,” the source said.

Two lo­cal banks have joined the fray, sub­mit­ting of­fers to fi­nance the ac­qui­si­tion of the CRJ'S.

But sources say the with­drawal of the Cana­dian lender has trig­gered a flood of of­fers that are cheaper than the 3.5 per cent that the Cana­dian fi­nancier was of­fer­ing.

“Fund man­agers from Aus­tralia, Europe and the Mid­dle East have sent in pro­pos­als that are sig­nif­i­cantly bet­ter that what Canada Exim bank had of­fered. The Chi­nese have been out of play from the be­gin­ning be­cause the project is run by a team of rigid cadres that have kept the com­mis­sion agents from both within the govern­ment bu­reau­cracy and State House at bay. So they have not been in con­tention,” a source told

Two months ago, Uganda Air­lines said it planned to start op­er­a­tions from April next year, with Min­is­ter for Works and Trans­port Mon­ica Azuba an­nounc­ing that they will re­ceive the first Bom­bardier air­craft in Jan­uary and the other three over the fol­low­ing three months.

“We have al­ready fi­nalised the CRJ con­tracts with Bom­bardier and have paid a com­mit­ment fees of $400,000. We are also ex­pect­ing to re­ceive two Air­bus A330-800 Neo in When Uganda Air­lines was liq­ui­dated 17 years ago, a pri­vate in­vestor re­served the name as his own trad­ing name. How­ever, Kampala learnt last year that the pri­vate owner had not op­er­ated the air­line busi­ness as per the terms of regis­tra­tion, leav­ing the govern­ment in a po­si­tion to re­claim and use the name, but there re­mained a le­gal hur­dle. In Jan­uary this year, Kampala 2020, for which we have paid a com­mit­ment fees of $800, 000,” Ms Azuba said.

The car­rier's or­der for the CRJ-900S was val­ued at $190 mil­lion.

“We are de­lighted to have or­dered the world's lead­ing re­gional jet, and as we are es­tab­lish­ing En­tebbe as a strong hub in East Africa and build­ing more con­nec­tiv­ity in Africa, we thor­oughly re­viewed our needs. With its proven track record in Africa and other re­gions of the world, we are con­fi­dent that the CRJ-900 air­craft will help us suc­ceed,” chief ex­ec­u­tive of Uganda Na­tional Air­lines Ephraim Ba­genda, said dur­ing the sign­ing cer­e­mony.

Ac­cord­ing to the draft of a busi­ness and im­ple­men­ta­tion plan seen by Uganda Air­lines had in­di­cated that it would re­launch with ser­vices to 15 re­gional des­ti­na­tions out of En­tebbe, which will be reg­is­tered two com­pa­nies — Uganda Na­tional Air­lines Co Ltd and Uganda Na­tional Air­lines Ltd — the former as a pub­lic en­tity and the lat­ter a pri­vate com­pany, as its Plan B and C to step up and op­er­ate the na­tional car­rier, ac­cord­ing to in­for­ma­tion from the Uganda Regis­tra­tion Ser­vices Bureau. com­ple­mented by three do­mes­tic routes and an equal num­ber of in­ter­na­tional des­ti­na­tions in the short to medium term.

The car­ri­ers' in­ter­na­tional route net­work will com­prise Lon­don, Mum­bai and a point on the Chi­nese main­land.

Ac­cord­ing the plans, breakeven on the re­gional routes, which will ac­count for 60 per cent of rev­enue, is pro­jected for the fourth year. Op­er­a­tional breakeven is be­ing pro­jected at a load fac­tor of 64 per cent for re­gional routes and 80 per cent for in­ter­na­tional routes.

The plan also projects that the car­rier will cap­ture a quar­ter of Uganda's 1.6 mil­lion pas­sen­ger mar­ket in the first year, pro­gres­sively in­creas­ing that as more ca­pac­ity be­comes avail­able.

The 15,000 pas­sen­gers a year do­mes­tic mar­ket will be served through part­ner­ships with ex­ist­ing do­mes­tic air­lines.

Pic­ture: File

A Uganda Air­lines plane. The car­rier was liq­ui­dated in May 2001; now plans are un­der way to re­vive it.

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