Tanzanian parliament takes issue with Air Tanzania legacy debts
A figure of 133 billion Tanzania shillings in accumulated debts over the years was mentioned in parliament earlier this week during discussions of the 2014/15 budget as members of parliament discussed
A figure of 133 billion Tanzania shillings in accumulated debts over the years was mentioned in parliament earlier this week during discussions of the 2014/15 budget as members of parliament discussed Air Tanzania and the ongoing financial support extended by government to the parastatal.
The massive amount was cited as a major reason that all past efforts to privatize the airline again have failed, with investors shying away from inheriting such legacy debts and having to pay them off or be faced with immediate court cases to recover outstanding amounts.
Aviation observers though also attribute the complex situation with labor unions to the failure of government to find a suitable investor with at least one regular source claiming that this was a problem for a new investor as bad if not worse than the legacy debts. “The unions got used to have a big say in parastatals like Air Tanzania and they have misused their influence. Unless this is curbed and eliminated big investors are not going to come to ATCL’s financial aid because they have two areas where they can get hit, huge debts and unions who will immediately the new shareholders come into play start acting up again. If government were serious they would maybe just dissolve ATCL and form a new corporate body free of debts in which the public and foreign investors can put their money but the status quo has been for long very unsatisfactory. Apart from that, these constant bailouts tilt the market and will have a long term impact on other major airlines like Precision and Fastjet because they do not get such subsidies.”
Several past efforts to have Chinese airlines take a stake in ATCL and more recently of an Omani aviation investment group have failed to yield any positive results, suggesting that indeed, after due diligence, potential investors see more problems than potential yields.
Air Tanzania, after receiving a leased Bombardier CRJ200 jet a few months ago, is now also under pressure to further increase their fleet as they promised in order to roll out additional domestic and regional destinations, justifying ongoing financial support by government.