Privatised, Air Tanzania Goes at $7.3m Loss

Monday January 17 2005

By ABDUEL KENGE
SPECIAL CORRESPONDENT

AIR TANZANIA Company Ltd (ATCL), which has made a pretax loss of Tsh7.7 billion ($7.3 million) in the first 16 months since it was privatised, says its original sale masterplan was not realistic.

The ATCL chief executive officer and managing director Dumisani Sangweni, told The EastAfrican last week that between December 2002 and March 2004, the company had a turnover of Tsh39.6 billion ($37.7 million), while its expenses stood at Tsh47.3 billion ($45 million).

"This loss is significantly higher than expected... but this year we will concentrate on bringing down the loss after identifying our passengers and market needs," Mr Sangweni said.

He said the loss was "due to the inability of the company to roll out its network as quickly and as broadly as was anticipated at the time of concluding the privatisation transaction."

One of the recomendations during privatisation of Air Tanzania was to make Dar es Salaam International Airport a hub to cater for the transit passengers, but it proved unrealistic as it needed to be modernised to handle more passengers and cargo.

The domestic and regional networks were served unprofitably given the type of equipment used by ATCL, forcing the airline to reduce frequencies, affecting the domestic routes of Tabora, Shinyanga and Kigoma from Dar as well as the Dar es Salaam-Nairobi route.

Mr Sangweni said, "The challenge was to try to understand what the market wants." He added that, without understanding the market trends, certain assumptions had to be made when the network was being planned.

He said the company has prepared another five-year business masterplan, similar to the previous one, but fine-tuned "based on what role we want to play and what customers we want to serve, and the market we want.

"The ATCL board of directors is happy and has approved the new masterplan. The rollout will begin soon and will last for six-weeks," the CEO said.

In the new masterplan's phase III, the Dar es Salaam network will be linked to the Middle East and Asia, capitalising on traffic connecting through the Dar es Salaam hub. Extensions to West Africa and Europe will follow, said Mr Sangweni.

ATCL acting commercial director Mike Bond said that, to realise the envisaged extension of services to long-haul destinations, the company will use wide body or appropriate aircraft when the rolleout takes off.

"As far as domestic routes are concerned, the airline will concentrate on those profitable frequencies," Mr Bond said. "Those are routes that are suited for the type of aircraft we fly."

Currently, ATCL operates four aircraft – three Boeing 737-200s, two dry-leased from Argentina, and a Fokker 28 wet-leased from South Africa. Mr Bond said the F28 is wet-leased because there are no Tanzanian pilots to fly, most of them having left the country to seek better pay.

He said the airline pulled out of the Dar-Harare, Dar-Lubumbashi and Dar-Lusaka routes because these point-to-point routes had proved to be unprofitable.

Mr Bond said a newly designed regional network with better connectivity would remove these point-to-point destinations to create a transit point at Dar. He gave the example of the Dar-Nairobi-Dar route, where ATCL has been losing heavily to Kenya Airways.

Air Tanzania Corporation (ATC) was privatised in November 2002, changing its name to Air Tanzania Company Ltd (ATCL). South Africa Airways (SAA) acquired a 49 per cent stake in the new airline and became a strategic equity partner of the government of Tanzania, which continues to hold a 51 per cent stake in the company.

When ATC was privatised, "We thought it was not wise to continue with the code-sharing agreement between KQ and ATC as South African Airways are competitors with KQ," Mr Bond said, adding, "ATCL cannot compete with KQ because KQ is one of the biggest airlines in Africa and when ATC was privatised it was behind by 50 per cent in terms of market share."

However, plans are underway to add Kigali, Bujumbura, Lusaka, Harare and Victoria Falls, among others, to ATCL's route network.

Meanwhile, ATCL says on-time performance has grown from 71 per cent in December 2002 to over 80 per cent currently. The technical dispatch, a measure of the absence of technically induced flight cancellation and delays, has improved from 95 to 96 per cent during the same period.

ATCL inherited 250 former employees of the defunct ATC along with only one Boeing 737-200.

Its network has expanded dramatically from only 10 domestic frequencies (Mwanza, Kilimanjaro and Mtwara) and eight regional frequencies (Nairobi and Johannesburg) to 49 domestic frequencies (Mwanza, Mtwara, Kilimanjaro, Zanzibar) and 19 regional frequencies (Nairobi, Entebbe, Johannesburg and Hahaya).