Precision Air a link to Tanzania’s future

 - December 6, 2007, 7:14 AM

Among the big jets filling the ramp at Nairobi Jomo Kenyatta International Airport, the small green and yellow ATR twin turboprops of Tanzanian regional carrier Precision Air Services feel quite at home. Seven times a day they land and take off to carry passengers to all the principal destinations in neighboring Tanzania, serving both business and leisure markets and proving a perfect match for equity partner Kenya Airways.

The airline has come a long way since it started in 1993, and its contribution to the development of tourism and business links in one of the poorest countries in the world cannot be overstated. When prolonged dry spells that wiped out coffee and wheat production forced local entrepreneur Michael Shirima to close his aerial spraying business, he turned to passenger transport. The time was ripe, as flag carrier Air Tanzania started to withdraw from the domestic market.

But financing the new undertaking in a country where private enterprise hadn’t grown beyond its infancy proved something of a challenge. Having identified tourism as the prime target, Shirima found an ally in the Africa Project Development Facility (APDF), a multi-donor initiative to support small and medium-size enterprises.

As a result, the Tanzania Venture Capital Fund provided $333,000 in start-up funds, enabling Shirima to acquire a small Cessna  with which Precision Air offered charters before venturing into scheduled services in October 1994, initially flying the Arusha-Seronera and Zanzibar routes.

A capital increase through the APDF helped the regional airline graduate to larger aircraft, including a leased ATR 42, a Cessna Caravan and a Czech-built Let L-410. The network expanded to link 13 destinations within Tanzania and with Nairobi and Mombasa in Kenya. The growth of tourism in the country–visitors tripled in the five years by the end of the decade, creating nearly half-a-million new jobs–was no coincidence.

When the Tanzanian government started a search for an equity partner for its struggling flag carrier Air Tanzania, Kenya Airways considered taking the 49-percent stake on offer to gain access to the famous tourist areas of its East African neighbor. After careful analysis, however, it left Air Tanzania to its other suitor, South African Airways, and instead linked up with Precision Air Services, signing a strategic partnership in March 2003.

Kenya Airways took a 49-percent stake in Precision, with shares coming from Shirima, the East African Development Bank and Tanzania Development Finance. As part of the agreement Kenya Airways filled key senior management positions and provided technical assistance.

Managing director Alfonse Kioko, who moved from his position as Kenya Airways general manager for the Middle East and Asia to Precision Air, cited several reasons for the Kenya Airways investment: “Precision Air was a profitable company, it had a good reputation and it was regarded as the second national carrier with full traffic rights.”

Today, Precision Air flies the biggest network in Tanzania, serving 11 destinations from hubs at Dar-es-Salaam, Kilimanjaro, Mwanza (Lakes region) and the spice island of Zanzibar, providing seven daily connections to Nairobi in total. Precision Air also offers nonstop flights between Dar-es-Salaam and Dubai in a code-share arrangement with Air Malawi. Regional expansion plans include new service to the Comoros and Reunion in the Indian Ocean, and to Zambia, Mozambique and Angola.

The airline has upgraded from Let L-410s and Cessna Grand Caravans to considerably larger ATR turboprops–four ATR 42-300s (three on finance and one on operating lease) and two ATR 72-200s on operating leases. It expects to carry 360,000 passengers during its current fiscal year and generate annual revenue of $45 million, up from $32 million the previous fiscal year, according to Kioko.

Precision’s healthy balance sheet (profits doubled in the first six months of the financial year to Sept. 30, 2005), 15-percent annual growth in Tanzania’s tourism industry and a 6.5-percent increase in the country’s gross domestic product last year has encouraged the carrier to draw ambitious plans for the future.

In June it plans to introduce a Boeing 737-700 on routes from Dar-es-Salaam to Entebbe via Nairobi, and to Johannesburg and Dubai, to be followed by further 737s, one in each of the following two years.