KQ comes to Precision Air’s rescue with $10m

{{Kenya Airways has agreed to inject $10 million into Tanzania’s Precision Air in a bailout plan, raising hopes that the country’s biggest private carrier will continue its operations.}}

The capital injection will keep Precision Air’s turnaround strategy on course, given that it could only raise half of its target in an initial public offering (IPO).

“Kenya Airways’ decision to inject $10 million into Precision Air is subject to approval by various regulatory bodies,” Precision Air chief executive Sauda Rajab told The EastAfrican.

“Kenya Airways now owns 41.15 per cent of Precision Air.

“If concluded, that will increase KQ’s stake to 49 per cent, making it the majority shareholder.”

However, the funding still falls short of the $33 million that Precision Air had indicated it needed to shore up its cash position and settle outstanding debts to creditors, including the Tanzanian government.

Ms Rajab said KQ agreed to the injection on condition that the airline would sell or lease back five of its remaining nine aircraft, retrench more than a fifth of its staff, outsource some functions and draw up a plan to reduce debts while improving cash flow.

The Kenyan national carrier had not responded to our enquiries by press time.

Airlines normally sell their aircraft and immediately lease them back as a way of freeing up cash, in a transaction known as a sale-lease back.

Precision Air was founded by Michael Shirima with just one aeroplane in 1993. It now employs close to 700 people and is negotiating with the government to swap $9.6 million in unpaid landing fees and other taxes for equity.

“Our ongoing turnaround efforts will give us relief and enable the company to pay off its longstanding debts,” Ms Rajab said. “Our staff had to give up some allowances and pilots of 737s who could not operate ATRs had to be retrenched after the flights were stopped.”