Tanzania Daily News (Dar es Salaam)

20 November 2012

Tanzania: Price Wars Up As Airlines Compete for Supremacy

THE battle for supremacy in the country's civil aviation industry is set to intensify, following the entry of low cost carriers in the market.

The battle is expected to be mainly between FastJet and the Precision Air.

The state-owned Air Tanzania Corporation (ATCL) is crippled as it operates with a single aircraft -- Boeing 737-200.

Precision Air is, however, counting on flexibility of its ATR fleet capable to land on underdeveloped airstrips with short runways, which is an advantage over the low cost carrier, which operates a gigantic equipment -- Airbus A319.

"The ATR 42-600 is suited to our growth ambitions on the African continent and ably supports our plans to fly new routes and increase frequencies on existing ones.

"It affords our passengers excellent cabin comfort, while enhancing operating efficiency," Precision Air Group Managing Director and Chief Executive Officer, Mr Alfonse Kioko, told a news conference recently. FastJet Chief Commercial Officer, Mr Richard Bodin, recently said the aircraft is not able to land on some underdeveloped airports and airstrips in the region.

"We shall fly to where we can be able to use it," he said. The low cost carrier, FastJet, announced that it will start operation at the end of this month (November) following acquisition of Fly540. The price per route is pegged at 32,000/- exclusive tax, but a passenger has to pay for his luggage, food and refreshment while on flight.

FastJet said it will have 10 fare classes and the lowest fare is 32,000/- between Dar es Salaam and Lake Victoria port city of Mwanza, while the highest tariff is around 170,000/- per trip using the 150-seater Airbus 319. The rising air transport competition is prompting airlines to go back on drawing tables to sharpen their services offered on and off board.

Precision Air, the largest carrier in the country, has ordered five ATR latest version, Dash 600, aircraft to be delivered in the next three years. One, ATR 42-600 was delivered last week while three others are in pipeline and one ATR 72-600. Mr Kioko said his company will invest up to 100 million US dollars (about 160bn/-) in a bid to expand the company's fleet in the next few years.

Mr Kioko said the 50-seater new aircraft will be used to increase frequencies on the airline's Dar - Kilimanjaro route. "The introduction of these new series aircraft will increase our ATR fleet to 14 thus making the airline largest ATR operator in Africa," Mr Kioko stressed.

Mr Kioko said his company is focused towards making the country the first and the only one in Africa to own sophisticated and modern navigation model that will optimise time for approach, reduce fuel consumption and more comfort for passengers.

ATCL, which resumed flights recently using Boeing 737-200, an older version of B737, is offering competitive fare of around 200,000/- return for Dar-Mwanza. However, industry sources have played down the move that they have described as Fastjet's short-term strategy to capture the market share with no much effect in the market, in the long run.

The airline analyst, who preferred anonymity, said anything below 150,000/- return fare is unrealistic fare since there is no gain on such prices as aviation operational costs are very high. "It will affect other airlines in short-term as passengers will be pulled by the lower price, but not in a long run they'll return as quality of service matters most," he said.

He added: "Current prices at the market are very fair, despite being competitive." The analyst said the prices are unrealistic as flying to and from Kilimanjaro an aircraft like B737 or A319 burns 6,000 litres of fuel, equivalent of 6,000 US dollars (over 9.6m/-) without taking into consideration salaries, landing fees, maintenance and other running costs.

"The FastJet fare will only be sustainable if the airline receives subsidies from elsewhere," he said. "Otherwise it's just a market capturing gimmick in a short life span." The Precision Air Chairman, Mr Michael Shirima, said the airline always puts passengers' comfort and safety before anything and that is why they ordered the new state-of-the-art aircraft.

"We want our passengers to enjoy their flight, all the way and not arriving at their destination with gloomy faces," Mr Shirima, who is also the founder of Precision Air, said. Precision Air is the leading airline in the country with a fleet of 14 aircraft and is owned by local shareholders by almost 30 per cent.

Launching the airline last week, FastJet Chief Executive Ed Winter said they wanted to break the exclusivity that air travel was an option for a minority in the country. "FastJet will make flying an affordable option for more Tanzanians than ever before," Mr Winter said.

Experts are saying giving the high operative costs of airline the FastJet offered price of 32,000/- for a single route may be limited to two or three passengers. The rest of passengers travel for 100,000/- or 120,000/- for single way, which is translated to similar prices offered by Precision Air and ATCL.

Tanzania Securities CEO Moremi Marwa said despite a number of challenges facing aviation industry, "Precision Air is still a good company to buy." "Even if the low-costs are coming in, Precision is still doing well compared to competitors," Mr Marwa said.

"It will take not less than a year for the new comers to catch-up with Precision Air." At the end of the runway, the customers are the one who would benefit most on the current escalating competition due to improved services and equipment and as well as affordable fares.

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