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State considers Precision Air bailout appeal

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.



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