Friday, August 16, 2013

■ TANZANIA: Precision Air to post loss during latest Financial Year; asks government for $32mln in funding.

Precision Air Tanzania's Precision Air (PW) will this year post a heavy loss, the airline’s board chairman, Mr Michael Shirima, has announced. In addition, the airline has reportedly asked the government, among various other undisclosed financial institutions, for TZS51.2billion (USD32million) in funding to help cover bank loans and instalments for its TZS218billion (USD136million) order with ATR which includes four ATR42-600s and one ATR72-600.

Precision Air's ATR42-600 in ToulouseSpeaking to the Tanzanian media, Mr Shirima said the company's financial crisis had arisen due a variety of factors namely spiralling fuel prices, high taxes and levies and currency fluctuations but singled out the failure of the airline's 2012 IPO on the Dar es Salaam stock exchange to attract sufficient investment as having been a decisive factor.
We expected pension funds to buy shares but, to our surprise, they didn’t,” Mr Shirima said. “Our cash flow is now constrained. The audited accounts for 2012 will be out any time from next week and for the first time we are going to post a loss,” he added.
The entry of LCC fastjet (FN) into the Tanzanian playing field is also speculated to have caused  havoc with the carrier's bottom line.

Mr Shirima, the founder of Precision Air, also said that 41% shareholder, Kenya Airways (KQ), had failed to inject much needed capital into the carrier, which compounded its financial woes. He noted that Dodoma had shown a "positive" response to the airline's request for funding but that the process was taking time. Sources said the airline had left the government to decide whether it would act as a guarantor for a bank loan or provide funds in exchange for a stake in the troubled carrier. In June, it was reported that any public funding would have to be drawn from an insurance cover for an Air Tanzania Bombardier Dash-8 aircraft that was involved in an accident at Kigoma Airport in April, 2012. However, that route would prove difficult given the financial crisis that Air Tanzania (TC) is in and its own need to shore up funding to source new aircraft.

As part of a five-year-strategic plan unveiled in April by new CEO Sauda Rajab, but whose success depends on sufficient capital from creditors and shareholders, Precision Air has made the recent switch to an all turboprop fleet with added focus on developing its domestic Tanzanian presence. In addition, a staff rationalization programme will be embarked on to trim down its workforce from the current 700.