Canada ‘pulls out’ of funding deal for Uganda Bombardiers
The credit agency first asked for a two-week extension to deliver the term sheet
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.
A Uganda Airlines plane. The carrier was liquidated in May 2001; now plans are under way to revive it.