Air Tanzania to receive Sh10bn government bailout

Tanzania has announced a significant financial intervention to rescue its embattled national carrier, Air Tanzania Company Limited. The government has allocated Sh10 billion to bail out the financially strained airline, following a series of challenges that have plagued the company in recent years. The decision to provide this bailout comes after Air Tanzania was forced to ground its entire fleet of Airbus A220 aircraft in November 2022 due to engine problems. Derek Nseko, the Founder of Airspace Africa, shed light on the airline's predicament in a recent interview with CNBC Africa. Nseko highlighted the tumultuous year that Air Tanzania faced in 2022, underlining the broader difficulties experienced by the aviation industry as a whole. The airline had accumulated a significant amount of debt over the years, with the grounding of its A220 fleet exacerbating its financial troubles. The reliability issues associated with Pratt & Whitney engines forced the grounding of the aircraft, resulting in operational disruptions and route cutbacks. Consequently, the airline's financial performance was inevitably impacted by these challenges. The government's Sh10 billion bailout is expected to address several crucial areas within Air Tanzania. Nseko emphasized that a considerable portion of the funds would be allocated to resolving employee grievances, particularly concerning unpaid benefits and contributions to the National Social Security Fund (NSSF). The airline's long-standing debts, which stood at approximately $132 million in 2021, will also be a focus of the bailout. Despite a reduction in losses in the previous year, Air Tanzania continues to grapple with its financial obligations, including outstanding debts and unauthorized borrowings. One of the key points of contention surrounding Air Tanzania's financial situation is the mounting debt that the airline has accumulated in recent years. The airline was accused of borrowing 896 billion Tanzanian shillings without proper authorization, further complicating its financial woes. Past instances of aircraft impoundments due to outstanding debts have underscored the precarious position that Air Tanzania finds itself in, with instances dating back to as early as 2017. Nseko also addressed the ongoing challenges that the airline faces in terms of potential aircraft impoundments, emphasizing the risks associated with traveling while carrying significant debts. To mitigate these risks, the Tanzanian government established the Tanzanian Government Flight Agency to handle aircraft acquisitions and leases, reducing the likelihood of impoundments. However, the reliance on government bailouts remains a prevalent theme for state-owned airlines like Air Tanzania. Regarding the grounding of the Airbus A220 fleet in November, Nseko clarified that the issue stemmed from engine problems with the Pratt & Whitney manufacturer, rather than an internal fault of Air Tanzania. While compensation details were not disclosed, discussions between the airline and the engine manufacturer are likely ongoing to address the revenue losses incurred as a result of the grounding. In essence, Air Tanzania's receipt of the Sh10 billion government bailout signifies a critical lifeline for the beleaguered airline as it navigates its financial challenges. The ongoing support from the Tanzanian government underscores the importance of a sustainable financial strategy to ensure the airline's long-term viability and operational stability amidst a turbulent aviation landscape.