Passengers disembark from newly leased Air Tanzania's Boeing 737-200 on Saturday last week, at Mwanza airport, shortly after arriving from Dar es Salaam. ATCL plane to cost Sh1.1b 3 months By Florian Kaijage 21st October 2012 Passengers disembark from newly leased Air Tanzania's Boeing 737-200 on Saturday last week, at Mwanza airport, shortly after arriving from Dar es Salaam. The newly leased Boeing 737-200 aircraft by Air Tanzania Company Limited (ATCL) could cost the troubled national airline more than a billion shillings within three months of the lease agreement, The Guardian on Sunday can reveal today. The recent lease agreement between ATCL (Lessee) and South Africa based airline company, StarAirCargo (Pty) Ltd, indicates that ATCL will have to pay the latter $1,350 (Sh (2,160,000) for every block hour, with a guarantee of 150 block hours a month. This implies that ATCL will have fork out a monthly $202,500 (Sh324 million) in lease charges in favour of Star AirCargo, which works out to whopping $607,500 (Sh972 million) for three months -- which is the total lifespan of the current lease agreement. One of the clauses on the agreement reads: "The first 100 block hours of the monthly 150 block hour guarantee to be paid up front in advance prior to the aircraft dispatching. This shall be the basic rate of $1,350 per block hour, multiplied by100 block hour, being the sum of $135,000." Another clause stipulates: "Once the aircraft has been utilized and has recorded the first 100 block hours, thereafter the lessor will invoice the Lessee for 50 hours at every 50 block hour interval of recorded utilization." The legal interpretation provided in the same lease agreement describes the block hour as each hour or part of an hour elapsing from the moment the chocks (wheel stabilizers) are removed from the wheels of the Aircraft until the chocks are next again returned to the wheels. The agreement provides further that block hours for any given calendar month shall be agreed in writing between Lessor and Lessee. In regard to the duration of the agreement (three months), the agreement provides room for review for possible renewal. The current agreement looks cheaper based on the figure for the lease fee ($1,350) compared to the fee for leasing 737-500 from the Dubai based airline company, Aerovista, which stood at $1,700 per block hour. The aircraft stopped flying on August 7 due to a lease agreement dispute between the Ministry of Transport and the aircraft owners. However, the Boeing 737-500 aircraft is a newer edition aircraft with less operational costs especially those emanating from fuel consumption level. An airline technical operations expert says the difference between the two editions is approximately 40 percent, bringing an average of $2000 (3,200,000/-) saving for single trip of one hour flying time. A Boeing 737-200 consumes about three (3) tons of fuel for such a trip . The leased 737-200 which begun flying domestic routes to Mwanza last week is the only ATCL flight currently operated by the national airline. So far ATCL is finalising the Check ‘C' technical maintenance of its Bombardier Dash 8-300 aircraft at the company's Hangar in Dar es Salaam. Check ‘C' is performed approximately every 15 to 21 months, or after a specific amount of actual Flight Hours (FH) as defined by the manufacturer. This maintenance check is much more extensive than a B Check, whereby pretty much the whole aircraft is inspected. It also puts the aircraft out of service and, until it is completed, the aircraft must not leave the maintenance site. There is also strictness on the ATCL responsibility to honour the lease agreement by effecting the agreed payments in time or risk termination of services, as one of the clauses indicates: "At all times during this agreement, the payments will be effected within 7 days after presentation of invoice. The Lessee hereby agrees that the Lessor has the right to stop the flying in the event both payments are not effected within the agreed time and that the utilization is in any way in excess of the payment" And the lease charges do not take into account of other charges such as per diem for 9 crew members, pegged at $80 a day as well as their hotel accommodation and transportation. This means apart from the lease charges ATCL is also required to spend extra $64,800 (Sh103.68 million) on crew per diems. The bill is therefore even bigger when the hotel accommodation and daily transportation charges are included. It is also clear that the national airline will bear other underlying, additional expenses, originating from bank charges during international transfer of funds to the South Africa based Aircraft owners. This is because one of the clauses on the lease agreement states: "All payments due to the Lessor under this Agreement shall be made on the due date for payment in US Dollars, in immediately available funds without any transmission or banking cost or any deductions or set off when transferred to the Lessor's account". For a decade the 35-year-old national airline has been experiencing often interrupted operations, making it unreliable as private airline companies such as Precionair have emerged and flourished under the same period. Precisionair is registered at the Dar es Salaam Stock Exchange (DSE) since mid 2011, a sign of recognition of a professionally run and relatively profitable company. On the other hand, another domestic and regional major competitor to ATCL, Rwandair, established in 2009 has purchased two brand-new Bombardier Canadian Regional Jet (CRJ) 900 series, expected to land in Kigali on October 21, 2012. And another private low cost airline, Fly-540 is repositioning its take-over by the European EasyJet is on final touches as the new brand name is expected to be FastJet.