Michael Wakabi/KAMPALA

South African Airways' (SAA) parent, Transnet, has ceased funding SA Alliance, leading to a scramble to raise cash by the East African regional's other shareholders. Existing reserves were due to run out as Flight International went to press.

Transnet's move is aimed at forcing Uganda and Tanzania to open regional and domestic routes to Alliance, making it their designated regional carrier. Its proposals have angered Air Tanzania, which accuses SAA of using Alliance as a Trojan Horse to take over national airlines in the region.

A meeting of shareholders in AJAS (African Joint Air Services), which controls Alliance, revealed that the airline owes Transnet $50 million, equivalent to the operating deficit accumulated since its launch in 1995. The airline needs $420,000 a month on top of its ordinary revenues to keep its long-haul operations to Europe and India airborne. AJAS also has a holding in Rwandan regional Alliance Air Express.

The meeting had been called to revise Alliance's charter, but was thrown into disarray by Transnet's tactics. SAA says it will fund up to 40% of Alliance's operating deficit, provided Uganda and Tanzania, which together own 60% of the airline, provide the balance, equal to $126,000 each per month.

A new funding agreement will inevitably mean a new business plan, although the two East African countries are resisting Transnet's schemes. Air Tanzania chairman Abbas Sykes says the proposal "amounts to surrendering national airlines to South Africa for free", while Uganda's privatisation minister, Manzi Tumubweine, says investment is being sought for a new entity, Uganda Airlines Ltd, into which the assets of Uganda Airlines are to be folded.

SAA recently dropped plans to invest in Uganda Airlines (Flight International, 4-10 April), and half of the latter's workforce have been sent on indefinite leave.

• UK transport secretary John Prescott has overturned a Civil Aviation Authority decision to award Virgin Atlantic Airways a second frequency to Cape Town, transferring the slot to British Airways, which now has daily flights.

Source: Flight International