PRECISION AIR’S FINANCIAL TROUBLES GO INTO THE PUBLIC DOMAIN
(Posted 10th June 2013)
Troubling financial details are emerging from Dar es Salaam over the financial status of Precision Air, Tanzania’s only publicly quoted airline company on the Dar Stock Exchange, with major shareholders being Michael Shirima, who founded the company in 1993/4 and Kenya Airways, the regional aviation giant.
The present management has until now not gone public, other than assuring their passengers in a recent statement, when revealing a new 5 year strategic plan review last week, that the airline’s underlying fundamentals are strong.
Usually well informed sources have suggested that the roots of the financial troubles extend back into the term of former CEO Kioko, who was at the helm of Precision Air for over a decade and was in charge of expansion and route development projects like flying to Johannesburg, purchasing a number of brand new ATR 42 and ATR 72 aircraft and leasing as many as 3 B737-300 aircraft. The Jo’burg flights were halted late in 2012 but not until after the route had dumped major red ink onto the airline’s bottom line in the balance sheet. Code shared flights with Kenya Airways from Dar and Kilimanjaro to Nairobi to a point assisted Precision Air to boost load factors, but it is thought that only the routes flown by the more fuel efficient ATR turboprops are presently contributing financially to the cash flow, perhaps one reason why the airline no longer operates all of their three B737-300. Those aircraft types are by the way being phased out by partner KQ, and converted into full cargo versions, while passenger services are flown with the more cost efficient Embraer jets and the latest B737-700NG’s and B737-800NG’s, which burn substantially less fuel compared to the ageing -300 versions.
From information at hand it appears that a formal approach has been made to the Tanzanian government to bail out Precision Air, which has stepped into the vacuum a moribund Air Tanzania left for the country’s domestic connectivity by air. National airline ATCL, currently only flying with one Bombardier Q300 aircraft, is financially crippled by historical debts and has been periodically bailed out by the government, something the present PW management and board seems to seek for themselves now.
Staff salaries have for months now been paid late, and there appears to be a backlog of NSSF remittances too, though the airline’s personnel have been remarkably loyal, also believing that the shortage of cash can be overcome and good financial order be restored. There is also talk of both the Zanzibar and the mainland CAA’s having had to agree to deferred payments of navigation, landing and parking fees, as well as for airport service charge.
The bailout reportedly would require the Tanzanian government to inject some 4 million US Dollars, perhaps even more, and there is, according to a well placed source within government circles, a lively discussion going on behind the scenes to perhaps take a major stake in Precision Air to ensure that air services into the more remote parts of the country can be maintained uninterrupted.
Questions are now being asked of course, who knew when and how much, in particular in view of the airline being a stock exchange listed company, which requires strict oversight from the board and regular reporting to the financial regulators. While at present there are no open suggestions, leave alone accusations at this moment in time of financial improprieties by the former CEO, it can be expected though that an audit will be launched to establish exactly why Precision Air, within the space of a few months since the departure of the former CEO, got in financially so deep and so fast.
An emergency board meeting, currently underway in Dar es Salaam, is reportedly looking at a number of options and has been grilling the former CEO on a range of issues earlier today. While no conclusion should be drawn on that action, it is an increasingly likely scenario that should any incriminating evidence be found, that court action will be swift to follow.
Meanwhile it should be stressed that all of Precision Air’s operations continue and passengers are being assured that flights will continue to serve Tanzanians across the domestic routes network.