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Atcl albatross: Has the govt been taking wrong decisions?

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by ByaseL, Apr 15, 2011.

  1. B

    ByaseL JF-Expert Member

    Apr 15, 2011
    Joined: Nov 22, 2007
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    The writing has been on the wall for a long time. On Friday March 25th, 2011 the Government of Tanzania (GoT) finally come out with an hard-hitting but somehow confusing statement to the effect that it will no longer provide funding to Air Tanzania Company Limited (ATCL).This statement was attributed to the Permanent Secretary of the Ministry of Transport, Omar Chambo, who was briefing members of the Public Operations Accounts Committee. To industry observers this wasn’t breaking news at all. However, what is rather disturbing is the manner the government seems to be waffling and looking for scapegoats in trying to disentangle itself from the ATCL albatross.

    Mr. Chambo said that the reason the GoT is pulling the plugs on the national airline is because Management and the Board have miserably failed to measure up to the task of running the airline viably. He further went on to say that ATCL workers will be laid off because at the moment there is no work to be done implying they are just idle and probably disorderly. But at the same time Chambo was quoted by the press saying that the GoT will put in place new Management and Board outfits. To do what? Your guess is as good as mine! Now listen to this; “the government will therefore encourage private airlines to fill the void left by ATCL,” said Chambo. But according to press reports the GoT has already identified a “suitable” investor to takeover ATCL. I am lost here. Can the government eat its cake and have it at the same time? Very contradictory and confusing utterances indeed!

    It’s an open secret that the demise of ATCL has always been a foregone conclusion the moment the carrier’s Air Operators Certificate (AOC) was suspended by Tanzania Civil Aviation Authority (TCAA) in December 2008. This action triggered a number of things including suspension of ATCL from the IATA Clearing House implying that the carrier could no longer transact financially with other airlines, suspension of the airline from the Multilateral Interline Traffic Agreement (MITA) in affect excluding ATCL from exchanging ticketing and cargo documents with other airlines and restricting the giraffe-tailed airline to domestic operations only, call it zero-grazing, if you like.

    ATCL was consequently grounded for nearly three months until when the GoT started taking half-hearted measures to try to resuscitate the airline. But how did ATCL take to this garden path in the first place? This column has extensively catalogued the reasons behind the national airline’s predicament. I will repeat them briefly in light of the new developments at ATC House.

    Firstly, the privatization of Air Tanzania Corporation in 2003 was bungled from the outset by pairing the national carrier with a wrong partner-South African Airways (SAA). This move was neither strategic nor material in terms of investment from the SAA’s takeover deal. ATCL was literarily stripped off all major functions; revenue accounting, aircraft maintenance, fuel management and airline management. In essence all critical airline functions were “exported” to Johannesburg and what remained at ATC House was just an empty shell-an airline on paper only. By the time the GoT took back ATCL in 2006 the airline was out of pocket to the tune of Tshs.13.3 billion. To-date most of this debt remains unpaid save the amount (Tshs 3.0 billion) owed to local fuel companies while the rest of the creditors have gone to court. This mess has nothing to do with the current airline Management or Board of Directors.

    When the current CEO, David Mattaka took over management from the SAA seconded management, ATCL was receiving Tshs. 500 million per month as subvention from the GoT but this financial support was immediately discontinued. Nevertheless, the incoming administration was able prune the operating costs and tone down the monthly hemorrhage to Tshs. 200 million and even managed to put away some USD2.0 million in a fixed deposit just for the rainy days ahead. What eventually happened to this money is the reason why ATCL is destined to go six feet under!

    Fast forward. The GoT courted the Chinese “investor” namely China Sonangol International Holding Limited (CSIHL) who came into ATCL with gusto promising to lead the airline to the biblical land of milk and honey. The company’s modest five year corporate plan was put on a backburner in favour of a grandiose one aimed at taking ATCL to new heights.

    A total of seven new aircraft comprising of two Q400 turbo propellers, three A319 and two wide-body A330 were booked for production at Bombardier and Airbus Aircraft Manufactures respectively. Meanwhile ATCL acquired two used Dash 8-300 aircraft for domestic operation and in order to kick-start the intercontinental operation, CSIHL and Airbus Company arranged the lease of the A320 aircraft. The entire package was signed, sealed and delivered courtesy of CSIHL. The Board of Director’s concerns about this eclectic expansion were somehow assuaged by both the GoT and CSIHL who promised to underwrite the working capital but in actual fact never materialized.

    Things were beginning to look rosy at ATC House when suddenly the Godfather (read CSIHL) developed cold feet while the GoT reneged on the working capital injection. Poor ATCL was left with no choice but to fend for itself and had to fork out Tshs. 7.1 billion (part of fixed deposit) to train pilots, engineers, buy spares, etc, for the new fleet. Like sunrise follows the night, it was just a matter of time before ATCL run kaput.

    Running short of cash the airline could no longer adhere to TCAA’s airline operator’s mandatory procedures resulting into eventual suspension of the AOC. It’s generally acknowledged that while all this was happening, the Management but specifically the Board were merely rendered on-lookers! This prompted two of the ATCL senior board members to resign in protest because of unwarranted interference by the GoT.

    Having said all this doesn’t absolve the Management as well as the outgoing Board from the blame as far as mismanagement of the airline is concerned. For example, the Hajj flights fiasco of 2007 which left the pilgrims stranded for several days at Dar es Salaam airport was indicative of lack of proper corporate governance. The government had to intervene to rescue the pilgrims at a great cost. While the Board of Directors was uncomfortable with the involvement of CSIHL in the airline, it however, didn’t put its case so strongly to the GoT, allowing itself to be turned into a lame duck governing organ until it was too late to change the deteriorating course of direction the airline was taking.

    It is abundantly clear that the two killer punches of ATCL are; first, the privatization of ATCL, jut like Tanzania Railways and Tanzania Telecommunications Company Ltd, was poorly thought out and shoddily executed. Second, the erratic involvement of CSIHL (especially the introduction of A320) in the airline did more harm than good. It’s disingenuous for the government to start finger pointing at other stakeholders on the demise of ATCL on trivial matters when the real issues that brought the airline to its knees lie squarely on its doorstep.

    Byase Luteke
  2. Pdidy

    Pdidy JF-Expert Member

    Apr 15, 2011
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    Bwana awe nawe
    waletee mswada wako kwa kiswahili watashiriki kikamilifu sana....tusijeurudisha kama wa adela aka makinda kule bungen kwake
  3. B

    ByaseL JF-Expert Member

    Apr 18, 2011
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    Duh! Bahati mbaya hii ni makala inayochapishwa kwenye Business Times ambalo ni Gazeti la Kiingereza.