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ATCL revival herculean task

30th October 2011
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  Govt coughs up $3m to settle bill for servicing one aircraft
  Business strategies outlined
Air Tanzania Company Limited

As the controversy-ridden, cash-strapped Air Tanzania Company Limited (ATCL) gets set to resume operations on Tuesday after being grounded for nearly nine months, it has emerged that the government paid a staggering $3million for service and maintenance of a single aircraft - Bombadier Dash 8 Q300 in South Africa this year.

The only operational aircraft available for the national carrier, was brought back in the country from South Africa in the middle of September and is due to fly on November 1 to Kigoma and Tabora for the first time since February.

The money in question could have however remained relatively low had it not been for accumulated debts by ATCL which led to the aircraft being held in South Africa until the debts were settled.

ATCL Chief Executive Officer, Paul Chizi, told The Guardian on Sunday in an interview that even the specific costing for maintenance shot up because it was executed in South Africa.

“It is very clear the costing could have been low if the maintenance was done domestically, but that was not the case since the ATCL was not allowed to carry out such maintenance following the suspension of its Air Operator Certificate (AOC) and its status as an Approved Maintenance Organisation (AMO),” said Chizi.

He noted: “The Government was asked to foot more than $1million specifically for maintenance but that cost would be as low as $250,000 (four times less) for the same work in the country, and this is the cost expected to service the second Bombadier Q300 aircraft.”

Chizi said the service and maintenance of ATCL aircraft in the country was made possible by the re-acquisition of AOC on October 6. The Certificate (AOC) was withdrawn by the Tanzania Civil Aviation Authority (TCAA) in 2008 and the airline was only allowed to fly on dispensation.

The resumption of Air Tanzania’s operations would be beneficial to airline service consumers as market competition stands to influence the pricing of tickets.

When Kenya’s Fly540 budget airline opened its business in Tanzania’s domestic market the ticket cost dropped by nearly 45 percent.

ATCL’s way forward

The ATCL boss pointed out that although the national airline resumes its operations with one aircraft, it has entered into an accord with Kenya’s Jet Link to lease one aircraft- Fokker 28 on standby arrangement in case the only available Bombadier Q300 was to be out of operations.

“We expect our second aircraft to be ready to fly in the next eight weeks after which we will resume flying to Arusha, Kilimanjaro and Zanzibar,” he said, noting that ATCL was still waiting for disbursements following allocation of Tsh16 billion to bail out the financially troubled company.

Afterwards ATCL plans to acquire a 50- seater jet – CRJ 200 in mid January 2012 on lease-purchase agreement.

Lease purchase agreement as opposed to outright lease, provides for eventual purchase of the aircraft after expiration of the leasing period.

According to Chizi, this arrangement is profitable to ATCL since it is less costly. He cited the example of how the Government unnecessarily committed itself to the lease agreement with a Lebanese company – Wallis Trading Ltd to lease Airbus aircraft, which was sold recently at $16 million despite ATCL having accumulated a debt totaling $37 million from the agreed $370,000 per month for 21 months.

Under a five-year business plan ATCL expects to acquire two jet aircraft: CRJ 700 and CRJ 900 which are 70-seater and 90-seater –planes respectively in the next two years before embarking on purchasing a 181-seater Boeing 737- 800, followed by acquisition of a Boeing -Dream liner.

The ATCL management plans to be operating nine aircraft of different makes and sizes in the next five years.

How to cope up with domestic and regional competition The ATCL boss said the management realizes the stiff competition facing the airline, but he and the staff were prepared to face the challenge and were confident to sustain such completion.

“We know they are there in the market but the good thing to note is that they have greatly benefited from the ATCL’s shake-up and we would regain our supremacy. The important matter here is to know what to do since the customers’ loyalty is still there,” the chief operating officer declared.

Fierce local rivals to ATCL are PrecisionAir, Kenya’s Fly540, Jet Link and Safari Plus. There are also three regional competitors led by Kenya Airways, the fast growing RwandaAir and Uganda Air.

Chizi said ATCL had a cost sharing accord with Jet Link for the Dar - Nairobi route, with Zambia’s Air Zambezi for the Dar – Lusaka-Harare, Dar Lusaka-Lilongwe and Dar-Lusaka -Lubumbashi routes as well Rwandair for Dar-Mumbai, Dar-Dubai Kinshasa and Dar-Lagos route whose franchise is held by ATCL.

He said they are at advanced stage of negotiation with Turkish Airlines with intent to engage on cost sharing on the Dar-Ankara - London, and Dar-Ankara - Guangzhou and Dar-Moscow routes.

A cost sharing agreement is an arrangement where an airline can issue a ticket for the route operated by another on payable percentage from every ticket issued.

“We will benefit financially from such agreement and it will be a good opportunity for us to establish statistics on the number of our flyers forming a realistic basis for expansion of operations,’ he emphasized.

Established after the collapse of East African Community in 1977 with 11 aircraft, Air Tanzania remained a key player in the domestic air travel business and in regional destinations until in recent years where it has suffered persistent financial and administration problems leading to frequent suspension of operations.

SOURCE: GUARDIAN ON SUNDAY
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