Air Tanzania Struggles with Rising Debt and Financial Woes

Air Tanzania, the national carrier, is facing significant financial challenges, with a total debt of TZS 595 billion as of June 30, 2024.

A large portion of this debt, TZS 369.13 billion, is owed to government institutions, primarily due to aircraft leasing agreements with the Tanzania Government Flight Agency (TGFA).

The Controller and Auditor General (CAG) has pointed to the airline’s ongoing operational losses over the past six years as a major contributor to its financial difficulties. Despite government subsidies, ATCL’s ability to generate sufficient revenue has been weak, and the management of leasing contracts has been problematic. The airline has also been unable to pay its taxes and contribute to maintenance reserves, which has further deepened its financial crisis.

Last year, the airline reported a loss of TZS 56.64 billion, which was higher than the previous year’s loss of TZS 35.2 billion. Even with government support amounting to TZS 31.55 billion in subsidies and TZS 7.45 billion for development, ATCL continues to face mounting challenges.

A key factor in ATCL’s financial troubles has been its high operational costs, including aircraft leasing and maintenance expenses. The grounding of aircraft like the Airbus A220-300 due to technical issues has only added to these costs, leading to both a loss of potential revenue and ongoing leasing payments.

In response to these issues, the CAG has recommended that ATCL and TGFA work together to come up with a realistic repayment plan for the airline’s debts.

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This plan should involve restructuring the debt, extending payment periods, and reducing monthly charges, to ease the financial pressure on the airline.

The report also highlights the need for better financial management at ATCL, stressing the importance of adhering to budgetary limits and improving procurement planning. Instances of unplanned spending and poor debt recovery practices have raised concerns about the airline’s financial oversight and discipline.

The government has been heavily investing in ATCL since 2016, with over TZS 3.63 trillion allocated to support its operations. However, the long-term sustainability of the airline remains uncertain. Implementing the CAG’s recommendations will be crucial for ATCL to recover from its financial difficulties and reduce its reliance on government aid.