Sometime back in 2006 the Government of Tanzania (GoT) took a bold decision and terminated the ill fated marriage between Air Tanzania Limited (ATCL) and South African Airways (SAA). There was a sigh of relief and exhilaration amongst aviation industry observers including yours faithfully. Under normal circumstances people do not jubilate over sad events like parting ways between two entities. But in a situation where in the marriage one partner is systematically abused, perpetually cheated and arrogantly ignored, a divorce can in this case be a source of joy and renewal to the aggrieved partner.
There are various and varied reasons why the matrimony between ATCL and SAA could not last but three stand out. Firstly, the objectives of the shareholders of ATCL namely the GoT and SAA were not in unison. GoTs objective was to create an international airline like Kenya Airways and turn Dar Es Salaam Airport into a competing hub with Nairobi while SAA saw ATCL as a feeding vehicle into its main hub at Johannesburg.
Secondly, SAAs investment in ATCL very much hinged on SAAs Networking Africa Strategy envisioned by its former American CEO, Coleman Andrews. When the Nigerian connection fell through the above strategy collapsed thus rendering ATCL to be of no value-addition to SAAs business model.
Thirdly and sadly SAA did not have internal competent skills to run a nascent airline like ATCL neither was SAA prepared to fork out some cash to hire the required expertise. The first management line up and subsequent leadership we saw at ATCL came from some internally displaced personnel within SAA masquerading as airline managers who within a short span inflicted a five million dollars hole on ATCLs balance sheet!
Like day follows the night what ensued was acrimony and recriminations between the shareholders and the best course of action was to let go. The GoT took full control of ATCL, appointed a new Chief Executive and Board of Directors while promising heaven on earth in terms of capital and human regeneration. Management and the Board were tasked to moot a phoenix plan for the liberated ATCL which entailed three phases. Firstly, ATCL to disengage from the parasitic SAA service outsourcing agreement ranging from fuel purchase, aircraft maintenance, financial and revenue accounting and frequent flyer program. The Second phase was to stabilize ATCL operations in terms of rationalizing the existing network and bring about financial sustainability. The final phase was to prepare a medium to long term plan that will evolve ATCL from a small scale domestic-cum regional airline into a regional and international aviation powerhouse in East Africa with tourism development at the forefront of the airlines mission.
While the first phase has been undertaken with great success, the second phase has been quite challenging to say the least. When the new Management took over from SAA seconded management there was a mess to clean up in terms of debts left by SAA team to the tune of Tshs.13.3 billion. The GoT undertook to underwrite these debts as part of the alimony for separation with SAA. Meanwhile the airline was bleeding to the tune of Tshs. 500 million per month which the GoT was shelling out as subvention. However this funding ceased soon after the new Management took over. Within three months Management was able to bring down the loss to Tshs. 200 million per month. Nevertheless, it did not take long for GoT to start baulking at settling the alimony when the debtors came calling and some like SAA are already in court. Meanwhile, as part of a medium to long term plan a Tshs. 67 billion budget was presented to the GoT to be considered for the 2007/08 budget period but was nipped in the bud for the reasons that we shall see below.
Enter China Sonangol Holdings Ltd (CSHL) of Hong Kong, the new found prospective investor. At the invitation of GoT , CSHL came into ATCL with engines firing on all cylinders. To cut the long story short this cash endowed ATCLs suitor, with no prior aviation experience to speak about, consigned the stabilization plan on a backburner and immediately set into motion ATCL expansion program. To their credit CSHL put down a payment ( for slots) of some $ 2.9 million with Bombardier and Airbus Company for two Q400 turbo prop, two Airbus 319 and two Airbus 330 all brand new aircraft from Bombardier and Airbus respectively. Meanwhile ATCL was told to go shopping for two used Dash 8 and lease in an Airbus 320 aircraft from Wallis Trading Company on CSHLs account. Things were getting rosy at ATC House, but not for long.
For some strange reasons CSHL started getting cold feet. The first call on the installments by the aircraft manufactures i.e Bombardier and Airbus Company did not materialize throwing the Sales Agreement between the manufactures and ATCL into tatters! The promised funds to introduce the Dash 8 and Airbus 320 aircraft into ATCL fleet system was not forthcoming either from GoT or CSHL thus ATCL was forced to dig into its miserable pockets. This act alone threw the stabilization process off course and the worst was yet to come. In December 2008 the giraffe tailed airline was forced to suspend flights because of not being able to fulfill the Air Operators Certificate (AOC) and the rest as they say is history.
It is an open secret that the national airline is in very dire straits and if something dramatic is not done we could be seeing the last moments of the Wings of Kilimanjaro. In my view the GoT needs to do three things;
Firstly, GoT should stop flip-flopping on ATCLs way forward, show firm commitment in terms of providing adequate capital in a timely manner. There is a lot of bureaucracy within the government system which is not conducive to airline operations. The notion that ATCL can fizzle out and Precision Air fill the void is nothing but self delusion. Once ATCL goes six feet under, Kenya Airways will simply pull the plugs on Precision Air and demand to set up its own camp in Dar Salaam and that will truly be the darkest moment for the aviation industry in Tanzania.
Secondly, GoT should go slow on the privatization of ATCL yet again. There is no need to rush into a pre-wedding party when both the bride and the groom are not yet ready! Let the shareholder clean ATCLs balance sheet and stabilize the airline first before looking for courtship. Although CSHL has deep pockets to bankroll ATCL, however, the Chinese investor is still a novice as far as the aviation business goes. Moreover, it is quite obvious that CSHLs interest in ATCL is dependent upon CSHLs success in securing other lucrative deals like minerals and oil from the GoT. Short of that CSHLs commitment on ATCL is not cast in stone.
Finally there is a need for the aviation authorities in Tanzania to go cautiously on adoption of the open skies policy given the precarious situation currently obtaining in the aviation industry in the country. This sector is so weak such that it cannot withstand full-fledged competition from foreign airlines hence the need to enforce some protectionism to give room to our home based airlines to grow. The Giraffe should not be left to die out.
Byase Luteke
