Precision Air Interview

Overview of the Tanzania Aviation Sector

TANZANIAINVEST has been interviewing Mr. Alfonse Kioko, MD and CEO of Precision Air, the leading Tanzania private airline, to gather his vision and opinion about the Tanzania aviation sector.

TI: How would you define the current situation of the Tanzania civil aviation sector?

Alfonse Kioko – Precision Air: I would say the civil aviation sector in Tanzania is developed and still developing at a very high rate of growth.

The regulatory body, the Tanzania Civil Aviation Authority (TCAA), starts many initiatives which are geared towards promoting the state of aviation in Tanzania.{xtypo_quote_right}The economic growth of Tanzania is the highest in East Africa and, therefore, we are seeing many investors and tourists coming to the country.{/xtypo_quote_right}

They are aware of any new developments happening in the civil aviation sector and they keep abreast on them.

We have very close ties with them and we work very closely.

During the last 3 to 4 years we have witnessed a tremendous growth in terms of the number of players in the market and in the route’s development and frequency.

The economic growth of Tanzania is the highest in East Africa and, therefore, we are seeing many investors and tourists coming to the country.

Therefore, the operators like us are just responding to this demand.

TI: Why is such a vibrant sector still characterised by high travel fares?

AK:
The fares can be considered high, but when you look at the state of the infrastructure, this has some cost implications.

For example, we have some runaways which are not paved and, therefore, further aircraft maintenance becomes necessary.

Also, if you look at the fuel prices, the airlines are struggling when it comes to that.

This tells you that, when you look at the profit margin that the airlines get in Tanzania, it is not that much.

Even though we have seen many new players coming to the market, we have also seen others exiting the market because they could not cope with the competition.

Aviation is a very tough business.

TI:
Is Precision Air looking to expand from regional airways to an international one now that Air Tanzania (ATCL) is in difficulty?

AK: We are designated by the Tanzania Civil Aviation Authority as the second national carrier in Tanzania.

With what is happening with our direct competitor, Air Tanzania, we are now the leading national airline in the country. {xtypo_quote_left} With what is happening with our direct competitor, Air Tanzania, we are now the leading national airline in the country.{/xtypo_quote_left}

We have expanded a lot within Tanzania because our strategy was first to have a firm base within the country and then to spring to the neighbouring countries.

Our focus is mainly regional: Eastern and Southern Africa, although we are also an international player as Kenya Airways owns 49% of our stakes. Kenya Airways now means KLM and Air France.

So, even now, we do operate international routes indirectly through others.

But as far as our direct operations are concerned, we want to first concentrate on Africa and from there, perhaps Asia.

TI:
How do you combine the growth of Kenya Airways competition with the ownership of Precision Air and how can the respective hubs, Nairobi and Dar es Salaam, develop in harmony?

AK:
Dar es Salaam is our main hub, but within Tanzania we have other mini-hubs: Mwanza, Kilimanjaro and Zanzibar.

These are mini-hubs from, or through which, several flights fly to Nairobi everyday.

With Kenya Airways being our main partner in Nairobi, we feed them and they feed us by co-sharing our flights.

The question is, hence, how we develop Dar es Salaam without stepping on each others toes.

To this regard, we are thinking to promote Dar es Salaam as a hub for the increasing traffic to the Middle East.

Nairobi, of course, is a bigger and more consolidated hub than Dar es Salaam as there are more carriers coming into Nairobi than here.

So, Dar es Salaam it is not as busy as Nairobi, but as time goes on we will see more carriers coming here.

Therefore, instead of going to Nairobi, first they may come to Dar es Salaam directly instead, or they may operate flights to both hubs like Emirates is currently doing.

Previously, they used to combine Nairobi and Dar es Salaam, but now they have de-linked some of their services.

So I can see that, in the forthcoming years, as Nairobi get busier, Dar es Salaam could be an alternative.

Qatar and Dubai are in a similar situation where the first is trying hard to become a hub like the second.{xtypo_quote}Dar es Salaam it is not as busy as Nairobi, but as time goes on we will see more carriers coming here.{/xtypo_quote}

Whether they succeed or not, Qatar will remain an alternative.


In regard to Precision Air, when we declare that we want to develop outside the country, it does not mean we are excluding Kenya Airways.

It simply means we are going to use our own aircrafts.

The growth we have experienced in the last 4 years is tremendous and we can’t remain a regional carrier forever.

I believe that, as a national carrier, we should be able to spread [our] wings to other destinations.

This does not mean we will stop supporting our partners and the other way around.

Also, apart from Kenya Airways, we also work closely with other airlines; in this business you can’t avoid that.

Outlook of the Tanzania Aviation Sector

TI: How do you foresee the development of the infrastructure in civil aviation taking place in Tanzania?

AK: I think the government has to take the leading role because they own some of these infrastructures.

Also, when it comes to private investments, these have to be given some incentives, but in a regulated manner.

For example, looking at the Kilimanjaro International Airport privatisation and the monopoly given to this for international flights in the Arusha region, it is hurting a player like the Arusha airport, which I consider to be a very good airport that could be open to East Africa countries, if not internationally, because of its location near the northern tourism circuit, where most people go. {xtypo_quote_left}The government has to take the leading role because they own some of these infrastructures.{/xtypo_quote_left}

As it is now, you can only land in the Arusha airport from domestic points, not from regional or international ones.

For that, you have to land at the Kilimanjaro International Airport.

This is a draw back [because], as much as the government wants to give incentives, these have to be given in a way that they do not harm the next opportunity.

You also realise that, for the Dar es Salaam and Zanzibar international airports, a ground handling monopoly has been given to two respective companies, Swissport (previously Dahaco) and ZAT.

We all know the problems of monopoly: poor service and high price.

Said monopoly is due to end in 2007 [and], even at Precision Air, we are ready to start our own ground handling company that, as a matter of fact, has already been registered.

The truth of the matter is, I believe there should be free competition.

Let the best companies win the customer.

Unless that is done you will not come to terms with what competition means.

If you look at Kenya, there are so many handling companies and the ones who get the business are the ones who deliver in all aspects.

TI:
Recently another international air carrier, namely Qatar Airway, has decided to fly to Tanzania. What will be the impact of that?

AK: The impact that I see is on the Middle East routes in competition with Emirates and Kenya Airway.

Personally, I think it is good for Tanzania and for Precision Air because it further links Tanzania to the world and eventually will feed our own internal flights.

TI:
What will be the impact of the new East African Community on the civil aviation sector in Tanzania?

AK:
What is going to happen in the airline business is that carriers will be able to link one point to the other within Tanzania, Kenya and Uganda without restrictions.

For example, if Precision Air decides to operate from Mwanza in Tanzania to Kisumu in Kenya, we will fly direct without having to go trough the respective national hubs.

I am hoping that with the East African Community we will have a free sky policy within the region.

It is going to be much easier and better for everybody.

TI:
As a Kenyan living and working in Tanzania, what is your personal opinion on the economic development of this country and the direction in which the country is headed?

AK:
I personally think there is an enormous potential in Tanzania, which is not being tapped for the time being.

I think the government is going in the right way as they are trying to encourage both investors and the free movement of persons and ideas.

Maybe the government should speed up a bit the process and be open to learn from others, keeping in mind, of course, that not all foreign things are good. {xtypo_quote_right}The government is going in the right way as they are trying to encourage both investors and the free movement of persons and ideas.{/xtypo_quote_right}

Looking at the airline business, we have the example of Kenya Airways that has managed to be very successful in Africa.

They also used to be government owned.

I wish we could learn the lesson from them [about] what their challenges were, how they went through them and what new ides can we borrow from them.

Finally, in Tanzania, the issue of security is superb.

You don’t hear about mugging and robberies here and this is key for tourists as well as for investors.