The government has been urged to collaborate with Air Tanzania Limited (ATCL) in conducting a study on the most suitable aircraft operation model, considering financial, political, and economic factors to enhance the airline’s operational efficiency.

This was recommended by the Controller Auditor General (CAG) Charles Kichere (pictured) in his 2023/2024 audit report.

The CAG said Air Tanzania Company Limited (ATCL) has recorded persistent financial losses for the past six years, despite receiving government subventions. 

In 2023/24, ATCL received 70bn/- to cover employee salaries and other staff costs, along with 57bn/- in capital grants for development projects. 

However, despite this financial support, CAG says ATCL’s net loss increased by 62 percent, rising from 56.6bn/- in 2022/23 to 91.8bn/- in 2023/24, with accumulated losses reaching 534bn/-. 

The worsening financial position was primarily driven by high lease and maintenance costs for newly acquired aircraft, further straining resources, the audit report says.

Additionally, the grounding of Airbus A220-300 aircraft due to corrosion and manufacturer-related engine faults led to significant flight disruptions, revenue losses, and unrecovered fixed costs on insurance, maintenance, and staff expenses. 

Furthermore, delays in freighter aircraft operations due to pending flight permits and slot approvals further limited revenue generation. 

“These ongoing challenges underscore the urgent need for cost control measures, fleet reliability improvements, and strategic revenue enhancement initiatives to ensure ATCL's long-term financial sustainability,” says CAG. 

According to the report, ATCL operated Aircrafts Grounded for a Long Period of Time.

“Paragraph 1.4.6.2 of Maintenance procedures Manual, 2024 entails one of the responsibilities of Chief Maintenance Officer is to execute scheduled and unscheduled aircraft maintenance in the hangar and ensure on-time maintenance performance is achieved,” he said. 

“My audit revealed four aircraft 5H-TCM-Airbus A220 were grounded for the periods ranging from 279 to 721 days up to the year ended 30 June2024.”

The report says ATCL management reported that the aircraft were grounded due to low performance for A220-300 aircraft as it is the type of aircrafts which were produced coupled with inadequate sale support services such as availability of spare parts (engines and other spare parts) and services. 

Further review noted that ATCL incurred fixed costs on four Airbus A220- 300 that remained grounded during 2023/24 amounting to 9.16bn/- . 

While the company received 5.49bn/- as lease incentives from Tanzania Government Flight Agency (TGFA); this amount covered only 60 percent of the total fixed costs incurred for the grounded Airbus aircraft, the report says. 

This is due to inadequate feasibility studies before acquiring the aircraft and a lack of understanding of purchase contract terms by ATCL & TGFA, resulting in missed warranty claims when the engines are damaged. 

As a result, the company has incurred unnecessary financial burdens that could have been covered under the warranty.

“ I recommend that ATCL collaborate with the government to assess the technical challenges associated with the A220-300 aircraft to determine whether it is feasible to continue operating this model, conduct a study on the most suitable category of aircraft for efficient operations, considering economic factors and geographical conditions and) together with TGFA conduct a comprehensive review of aircraft purchase agreements and maintenance activities to identify and recover any warranty benefits related to maintenance for each aircraft since the time of purchase,” says CAG.