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Etihad to exit Uganda. Has it got anything to do with the economy?

“Uganda is one of the continent’s fastest-growing business and tourism destinations, and the launch of services to Uganda is consistent with our strategy of targeting areas of strong growth in emerging markets” – said  James Hogan, chief executive of Etihad on 2nd May 2015. (James Hogan resigned from the CEO position this year).

What is clear now is that Etihad Aiways, the Abu Dhabi based carrier will not operate in Uganda for three years. In May 2018 it would have made three years, operating four flights a week to Entebbe International Airport. On 25th May 2018, it will be “so long, farewell,” to Etihad Airways as that will be the last day it flies to EBB. The airline noted that Uganda was being knocked off the route chart “following a commercial assessment of the route’s performance.” That is to put subtly. The airline is exiting Uganda because commercial viability is proving to unsustainable. The route was perhaps not making (as much if at all) money – profit -, as had been anticipated.

Etihad is not the only airline, this year to make a decision on frequency. Whereas Etihad will suspend all flights into EBB, South African Airways (FlySAA) in October 2017 reduced frequency into Uganda from 7 flights a week to 6. It should be noted that FlySAA was/is having its own financial troubles to deal with back home, relating to mounting debt. The frequency reduction was meant to ensure that the financial squeeze on the airline is eased.

Others have pointed to the fact that Etihad is the second airline in less than 3 years to exit the Ugandan market. British Airways called it quits in 2015, ending 24 years of service into Uganda. BA’s exit was seen as more a strategic decision because the Gulf carriers, Etihad, Emirates, and Qatar, had taken over BA’s space, offering competitive prices for connecting passengers.

Is it about the Ugandan economy?

How much of the Ugandan economy can we blame on Etihad suspending services into Uganda? There is not much to indicate that the Ugandan economy was growing fast enough to ensure that Etihad survives. Obviously, in noting that the commercial assessment of the route was not viable, it could be interpreted as the Ugandan economy being weak. Uganda’s economy only grew by 3.9% in the last financial year. Should this matter?

In part, yes. Have we built a middle-class of Ugandans that can afford to travel whether for business or holiday? I believe, not.

On the day Etihad unveiled flights to Uganda, they noted that “tourism and business” were some of the factors to come into the country. According to the Uganda Tourism Board, tourism numbers are on the rise, mostly driven by visitors that enter Uganda by road. The 2016 Statistical Abstract from the Ministry of Tourism, Wildlife, and Antiquities, indicates that in 2015, 402,000 tourists came by air to visit Uganda. This was a 9% decline from 2014. Tourists are visiting Uganda but most of them are using road transport from Rwanda, Tanzania, and Kenya. Can this be blamed on the Ugandan economy?

Al Arabiya picture

The other reason for the entry into Uganda was for business linkages. The United Arab Emirates (UAE) remains a popular destination for business people.

“The UAE is a major trading partner with Uganda and our new point-to-point services strengthen the two-way flow of trade and commerce between the two countries,” said  James Hogan, chief executive of Etihad on 2nd May 2015.

However, most of the business people fly to Dubai, instead of the Abu Dhabi, the home of Etihad. Dubai remains incredibly popular as it is base for several “Made for Africa” products. Several companies will have offices their Middle East and Africa operations in Dubai. So for the businessman, the airline to use was Emirates, based in Dubai. With Etihad, the passenger would have to fly to Abu Dhabi and then connect to Dubai. The pricing was also another factor, with Emirates almost often having a price lower than that of Etihad by between $50 to $80, depending on your destination.

Additionally, Emirates has often sold more than just an air ticket. Their selling point is the destination, being Dubai for starters and then how they connect the passenger to the world. Those two selling points have not been the strongest from Etihad. Emirates dominates almost all forms of advertising compared to Etihad.

Emirates Print Ad

So it would also be safe to assume that Etihad quit because what the competition had to offer.

However, if the Ugandan economy was much stronger, delivering the necessary returns for investors, then Etihad would have perhaps stayed or even just reduced its frequency. The Etihad exit is about Uganda’s economy on one hand and the Etihad strategy on the other.

Perhaps the lesson in this is for proponents of Uganda Airlines; if when you pocket is deep, you need to have a sustainable operation that looks beyond the airline but also emphasizes the destination.

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