Michael Wakabi/KAMPALA

Unresolved issues over routes left Uganda's government with only one bidder in the sale of 49% of Uganda Airlines on 30 April. A decision to enter direct negotiations with South African Airways (SAA) was taken after British Airways and Sabena declined to submit bids by the 23 April deadline.

The government had offered to take over the carrier's liabilities until privatisation, but failed to resolve contentious routes issues to the satisfaction of all bidders.

The 1994 African Joint Air Services agreement that established Alliance Air, the joint venture airline owned by the governments of Uganda and Tanzania, and their respective national carriers along with SAA, confers exclusive rights over Uganda's international routes to the carrier and restrains the designation of competitors as long as it is in force.

SAA is expected to ask Uganda to take over the remaining seven months of a lease for a Boeing 737-500. It says its $270,000 a month charge is above average. Uganda is eager to offload the loss-making airline as it costs $1 million a month in support. SAA's acquisition has met opposition, mainly because South Africa wants to change the operating code from QU to SA.

Source: Flight International