Former Precision Air CEO unveils management secrets

Precision Air (PW), which today dominates the country’s aviation market, was ten years ago, a simply small family managed business with two marketing officers.

There were minimal outdoor sales as the strategy was to wait for customers to come at offices of the then Arusha-headquartered airline. 

Before selling its 49 per cent stake to Kenya Airways (KQ) in 2003, the company had less than 80 staffs, with the first scheduled flights using a seven-seater one engine Cessna 207, one seven-seater Cessna 402, two eleven-seater Cessna 404s and the 19-seater LET 410 and later an ATR42.

The carrier used to operate both scheduled and charter flights although the scheduled flights were often disrupted in favour of the charter services. Although the airline used to fly to many points in the country, the frequency wasn’t its strength as most destinations were operated two or three times a week.

The story has, in a span of ten years, changed completely for PW today operates several daily frequencies on its network, flying to some routes up to five times, daily. The company has dropped the charter services to concentrate on the schedule flights. Mr Alfonse Kioko, the man behind PW achievements, remains proud of his ten-year stint at the helm of PW, notwithstanding the turbulence he has travelled through.

“Despite taking the company from a weak cash flow, I made no loss during my entire reign at PW,” Mr Kioko told the Business Standard in Dar es Salaam recently, attributing the exemplary performance to a good management team, supportive board, dedicated employees and cooperative customers. Without the support of the board and fellow employees, Mr Kioko concedes, no one could do what he did, no matter how bright or hard working one is.

“Whatever I did or initiated, the board was fully involved.” Mr Kioko left the airline on March 5, 2013 after the board of directors had pressed for his extension of the contract for three years against his wish for only one year, “to groom my successor.”

The airline has within a decade grown to become the regional carrier with about 800 staff, the youngest 12-aircraft fleet in the continent and an ultra modern hangar that cost 5.7 million US dollars (over 9bn/-) to construct. A duel diligence on PW by KQ prior to the two airlines’ partnership indicated clearly that PW had good prospects but its viability was subject to a capital injection of 12 million US dollars (about 20bn/-) to support operations.

“Sadly, not a single cent was injected into the operations and we had to start from weak financial and cash flow position,” recalls Mr Kioko. And to worsen matters, PW had no free tangible asset to use as loan security neither could KQ guarantee PW loans, citing Nairobi Stock Exchange (NSE) regulations. KQ is listed on NSE and cross-listed on DSE. So, financing was the most severe challenge to Mr Kioko and his management team.

The Business Standard was curious to know the secret Mr Kioko used after he took over the airline from its founder and first Chief Executive Officer Mike Shirima. “I believe in growth without which you stagnate and ultimately die,” hints Mr Kioko. Some managers believe in downsizing operations and possibly causing redundancies. But, Mr Kioko took the risk of overtrading but with well managed growth.

“There is no clear cut solution…different managers may deploy different strategies subject to circumstances,” he says. Through the expansion strategy, PW modernised its fleet, constructed its own hangar, offered direct employment to over 700 Tanzanians and supported many more businesses.

Later on, the airline partnered with the government of France to start Masters of Business Administration (MBA) programme to sharpen the skills of its labour force. Six Tanzanians have so far graduated with MBAs in France while 20 technicians and four pilots were also trained in France.

The airline embarked on an ambitious drive to replace the small capacity fleet with slightly bigger aircrafts. The firm bought ATR 42-500s and later ATR 72 that carry more passengers and increased frequencies. 

Mr Kioko says he strategically shifted the company headquarters from Arusha to Dar es Salaam to tackle competition from the national flag carrier—the then Air Tanzania Corporation (ATC).

The company has since its divorced marriage with South African Airways changed to Air Tanzania Company Limited (ATCL). PW made history in December 2011, becoming the first airline in Tanzania to list on DSE with 7,056 investors participating in the initial public offering (IPO) through which the airline raised 12bn/-, an oversubscription of 43.18 per cent. 

“This (the IPO money), as far as I remember, was the first external capital injection into the company…most of the time we had relied on internally generated revenues and banks loans,” says Mr Kioko. 

After the listing, PW ownership changed, with Tanzanians, KQ and other nationals controlling 58, 41 and one per cent, respectively. The airline’s current fleet consists of one 70-seater ATR 72-600, five 70-seater ATR 72-500, four 48-seater ATR 42 and three Boeings 737. Plans are underway to expand the fleet by acquiring more E-jets and ATRs.

However, some Boeings have been sent back after PW opted to scale down some of its local and regional routes due to what analysts see as the results of stiff competition from low cost carrier—FastJet. 

The airline has, soon after appointing the new CEO, Ms Sauda Rajab, announced the review of its operational five-year plan as part of its expansion and business review.

According to the new CEO, the airline is undergoing the review for operational and fleet expansion measures and re-assessment of its current position. 

“The plan will involve massive growth in our operations and will require injection of huge funds,” says Ms Sauda, brushing off speculations that the airline is in cash flow problems.
Source: The Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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