- Precision Air, a Tanzanian airline, faces severe financial crisis, including a $26 million UK lawsuit over unpaid aircraft leases, government refusal for a bailout, and investor Kenya Airways reconsidering its stake.
- The airline is technically insolvent, with liabilities exceeding assets, massive losses, and struggles to repay debts, mirroring broader challenges in Africa’s aviation sector.
- Despite CEO optimism about recovery strategies, including cost-cutting and fleet upgrades, the airline’s future remains uncertain amid industry-wide turbulence and skeptical investors.
After years of reported financial problems, Tanzania’s Precision Air is now facing legal action in the UK with reports indicating that the Tanzanian government has rejected a bailout plea, and its key investor, Kenya Airways, is reconsidering its stake.
According to Global Trade Review, Export Development Canada (EDC)—a Canadian export credit agency—is suing Precision Air in the UK High Court over an unsettled debt of nearly $26 million from an aircraft financing agreement. The lawsuit stems from a 2012 deal in which EDC provided direct financing for Precision Air to purchase two ATR 42-600 jets from French-Italian manufacturer ATR.
Media reports state that EDC is seeking $13 million under a leasing agreement for the first aircraft, covering unpaid rent of $13 million under a leasing agreement for the first aircraft, covering unpaid rent of $11.7 million and a termination fee of $1.3 million.
Additionally, EDC claims the second jet owes $11.3 million in unpaid rent and a termination payment of over 1.6 million, bringing the total sought to approximately 1.6million,bringingthetotalsoughttoapproximately $26 million.
Precision Air aircraft out of service
Citing Precision Air’s September 2022 financial statement, GTR notes that the airline argued the leased planes “have largely been out of service” and that it was working to return them to the lessor. “These aircraft have been grounded since 2017 due to technical issues and are not part of the active fleet,” Precision Air reported.
The airline admits to breaching loan agreements with EDC and other lenders, including Citi and Finland’s Finnfund, due to significant delays in repaying principal and interest. Finnfund had extended a $127 million loan to Precision Air in 2008.
The financial crisis has grown so severe that Kenya Airways (KQ), which holds a 41.23 per cent stake, is reassessing its investment. “Kenya Airways is currently reassessing its investment due to the airline’s financial difficulties, including liabilities exceeding assets, which have led to a state of technical insolvency,” reports indicate.
Precision Air’s troubles worsened in 2023 when it reported a net loss of 57.4 billion Tanzanian shillings (TZS). Local media attributed the losses to soaring administrative expenses and crippling foreign exchange losses.
Despite revenue increasing to TZS 134.7 billion (up from TZS 117.7 billion the previous year), administrative expenses surged sevenfold to TZS 16 billion, while a TZS 35.6 billion net exchange loss from dollar-denominated debt erased operational gains.
With liabilities now exceeding total assets, Precision Air is in a state of technical insolvency, casting doubt on KQ’s ability to recover its investment, currently valued at $498,383.
Kenya airways stake in Precision Air
Kenya Airways initially acquired a 49 per cent stake in Precision Air in 2003, positioning itself in Tanzania’s aviation market. However, after Precision Air’s 2011 listing on the Dar es Salaam Stock Exchange (DSE), KQ’s stake was diluted to 41.23 per cent, with the late Tanzanian businessman Michael Shirima’s estate holding 42.91 per cent and the public owning 15.86 per cent.
For KQ—which has faced its own financial struggles—the potential loss raises questions about its regional strategy and financial resilience. However, Precision Air CEO Patrick Mwanri remains optimistic.
“Precision Air is poised for a strong turnaround, and we are confident our strategic initiatives will drive sustainable growth in the near future,” he told the press.
Mwanri outlined recovery efforts, including cost optimization, safety prioritization, fleet and route rationalization, improved customer service, and maximizing aircraft utilization. The airline is also exploring smart technologies to boost productivity, leveraging Tanzania’s growing aviation sector.
Passenger numbers
He cited positive trends, such as passenger numbers rising from 470,624 in 2018 to 481,981 in 2023, recovering from a pandemic low of 245,875 in 2020. Seat occupancy also improved, with the cabin factor increasing from 53 per cent to 65 per cent in the same period.
Yet, challenges persist. Ken Gichinga, Chief Economist at Mentoria Economics, notes that Precision Air’s struggles reflect broader issues in African aviation, where carriers face high operational costs, debt burdens, and external shocks like COVID-19.
For instance, Kenya Airways required a government bailout in 2022 when the Kenyan state assumed its $841.6 million debt, worsened by currency depreciation. Similarly, South African Airways (SAA) needed a rescue package, while Air Zimbabwe remains on the EU Air Safety List, hindering international growth.
Despite these headwinds, Precision Air’s leadership remains hopeful. But with mounting debt, technical insolvency, and skeptical investors, the question lingers: Will it be enough?
Read also: AIM Congress 2025 ignites UAE-Japan-Africa investment synergies
