Troubled local airline, Asante Aviation, will wait till September 23rd to find out whether it will halt the seizure and sale of its aircraft by Stanbic Bank Uganda.
Appearing before commercial court Judge, Justice Christopher Madrama yesterday, Asante Aviation had an interim injunction extended as the judge reviews submissions made by the lawyers for the airline and Stanbic Bank. The previous interim injunction expired yesterday.
On July 19th 2013, Stanbic Bank lawyers, Kateera & Kagumire Advocates, appointed an administrator to seize two aircraft belonging to Asante Aviation in order to recover a loan extended to the company earlier in the year. The airline, which had chartered flights to DRC, South Sudan and within Uganda had borrowed 4.2million United States Dollars in 2013 to acquire three aircraft.
Sharon Tem, of Kasumba Kasule & Co Advocates representing Asante Aviation argued in court that they had fallen back on their debt obligations due the war that broke out in South Sudan in December 2013 and recently, the withdrawal of its Air Operator Certificate (AOC) by the Civil Aviation Authority (CAA) in June 2014.
The withdrawal of the certificate meant that the airline couldn’t make international flights. Tem told court that this “frustrated certain contracts.” She further said that these were “facts beyond their control” and that if the sale went ahead, the company would collapse. Asante lost five contracts as a result of the recall of the AOC.
She also argued that one of the aircrafts—5X-SUS—was currently a subject of an ownership case in the same court, adding that the bank couldn’t attach it because it was never provided for as a security in the loan agreement.
No locally registered airline currently flies outside the Ugandan borders, as CAA withdrew all certificates after the regulator failed an audit by the International Civil Aviation Organization (ICAO). This has crippled the operations of various companies, among them, Air Uganda, Ndege Aviation, Uganda Air Cargo, Mission Aviation Fellowship and Asante Aviation among others.
Stanbic Bank had moved in to repossess two aircraft belonging to Asante in order to recover the balance of the outstanding debt. The outstanding debt is currently 900,000 United States Dollars according to Asante Aviation lawyers.
Representing Stanbic Bank, John Fisher Kanyemibwa of Kateera & Kagumire Advocates, argued that the “breaches by Asante Aviation started way before the South Sudan war.” He pointed to a demand notice issued to Asante Aviation on September 22, 2013, after it had failed to make some payments on its loan.
He also said that the bank had the right to recover its money because without those international flights, the company wouldn’t be able to meet its debt obligations. Additionally, he told court that the ownership dispute of one of the aircrafts couldn’t halt the bank from making a recovery.
One of the clauses in the contract between the two is that proceeds of revenues from the South Sudan route would be used to service the loan.
When the case makes its way back to court, Asante Aviation will find out whether it will still be able to stop the bank from selling the two aircraft before the main case can be heard.
Ronald Kasozi, an Executive Director at Asante Aviation couldn’t comment on this issue.