$50 million losses forces Alliance Air to close

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Michael Wakabi/KAMPALA

Alliance Air has ceased operations, pending a final decision on its future by its shareholders. Owned 40:30:30 by South Africa, Uganda and Tanzania, its last flight departed London Heathrow for Johannesburg via Entebbe on 8 October.

A statement from Alliance in Kampala said its "international route structure was considered inadequate", and had led to accumulated losses of approximately $50 million. The decision will not affect operations by Alliance Express, the Rwandan flag carrier 49%-owned by Alliance. Rwandan Government sources said a new agreement would be entered with South African Airways (SAA) to ensure the Rwandan carrier continues operations. Alliance Air has been wet leasing from SAA a Boeing 767-200 for long haul operations and a Boeing 737-200 for Alliance Express.

SAA says it is reorganising its operations in East Africa and will be launching three flights a week to Entebbe beginning 1 December. SAA is also reported to be negotiating a stake in the Tanzanian domestic carrier, Precision Air.

Prior to the closure of Alliance, the partners were divided by a host of issues including what Uganda and Tanzania saw as a very high dependence on SAA for the carrier's existence. Aircraft, tickets, accounting, management and purchasing of critical components such as fuel were SAA controlled.

There were also questions about the structure of commissions paid to SAA and forward sales revenue. A new business plan, prepared in April by Alliance entrenched this relationship with use of the SA code and brand. Negotiations to resolve differences over the last 18 months failed.