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| Precision Air's ATR72-212A |
The Tanzanian government is considering
whether to bail out cash-strapped Precision Air (PW), The Citizen reports.
PW, which was once Tanzania’s fastest
growing airline, is struggling under a huge debt burden and has sought a $32
million (about Sh51.2 billion) bailout package from various sources, including
the government, to enable it to meet urgent financial obligations, including
servicing bank loans and paying aircraft suppliers.
The government, through the Transport
ministry, formed a committee last month to look into the airline’s request for
financial assistance, according to reliable sources.
The committee met from July 24 to
August 4 in Bagamoyo to assess the ailing carrier’s debts and operations and
handed over its report to Transport minister Harrison Mwakyembe on August 7.
“We met in Bagamoyo with a view to
establishing how PW came to find itself with such huge debts…we also sought to
know whether PW could be helped and if it could repay any loan advanced to it,”
said a source who did not want to be named for protocol reasons.
“We came to the conclusion that the
company needs to be bailed out because of its contribution to the economy,” he
said.
Members of the committee were drawn
from the Tanzania Investment Centre, Bank of Tanzania, Consolidated Holdings
Corporation, Tanzania Civil Aviation Authority, Attorney General’s Chambers and
Transport ministry.
The committee interviewed various
stakeholders, including Tanzania Revenue Authority and Tanzania Airport
Authority officials as it weighed the pros and cons of bailing PW out.
Transport deputy minister Charles
Tizeba declined to comment on the matter.
“I’m not ready to reveal information
about a private company. Talk to the owner if you want to know what was
discussed,” he said.
In another development, the PW
management has undertaken a forensic audit as part of efforts to find a
solution to problems bedevilling the company.
PW board chairman Michael Shirima told
The Citizen that only after audit findings are ready would the management
consider legal measures against those suspected of running the company down.
He linked the carrier’s former Kenyan
CEO Alfonse Kioko, who left the company early this year, to problems the
airline was facing.
“He (Kioko) deserves credit for
steering the airline during a long transition period, but he had some
weaknesses which are to blame for the problems we are now encountering,” he
said. Mr Shirima cited as an example the ambitious expansion plan that saw the
airline lease three Boeing 737 jets to fly to new destinations in Africa,
adding that the decision did not take into account the risks involved.
“He should have come up with a
realistic expansion plan so as to mitigate the risks.”
Reached for comment, Mr Kioko said that
he was ready for any investigation and was looking forward to the forensic
audit report.
“Let me clarify that the leasing of
aircraft and opening of new routes is a major decision that cannot be made by a
single individual…in fact, it cannot be done without the board’s approval,” he
said, adding that he would eventually be vindicated.
According to Mr Kioko, the process of
leasing a plane requires the company to draw a strategic business plan, which
the management deliberates and fine-tunes before it is presented to the board
for comments or approval.
“When your plan is approved, this forms
a roadmap for the next five to ten years. It may change depending on market
dynamics. We did all that during my days at PW,” he said.
“Even with this approval, when the time
comes for lease, you still have to go back to the board with a clear business
plan again showing the routes to be operated and revenues and operational costs
as well as profitability forecasts.”
He said that in any business, and
especially in air transport, market dynamics may change fast and that it makes
good business sense to adjust business plan and operations accordingly.
“Here I must confess that of all the
good things the good Lord bestowed upon me, He unfortunately denied me the
ability to predict the future with a lot of certainty,” he said
Mr Kioko became Precision Air CEO as
one of the pre-conditions set by Kenya Airways when it bought shares in the
airline a decade ago. Another post taken over by a Kenyan was Chief Finance
Officer.
SOURCE : thecitizen.co.tz
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