Dar es Salaam — Competition remains sharp in the ground handling business even as the authorities are looking to licensing one more operator at the Julius Nyerere International Airport (JNIA).
In an exclusive interview with BusinessWeek reporter Alex Malanga, Nas-Dar Airco general manager Miguel Serra cautioned against any plan to bring in a third groundhandler at JNIA. Excerpts:
QUESTION: There is a concern among aviation stakeholders that the ground handling business in Tanzania is featured with price war. What is your take on this?
ANSWER: Considering that there are only two players, what kind of price war can exist? A price war is no joke. Taking down the price to an unimaginable point is not easy. What ground handlers are doing is just normal negotiations as each player is exercising the right to negotiate and compete regarding its offer to customers.
If it is a tender for the services, the evaluator will use several criteria for the provision of concession - and price is only one of them.
Q: What is your call on the authorities regarding the ground handling business trend?
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A: We believe that the Tanzania Airports Authority (TAA) should reconsider bringing in a third concession at JNIA.
Q: (According to the Tanzania Civil Aviation Authority (TCAA), JNIA could have up to three groundhandlers).
A: A third groundhandler is not recommended because even the current two - with 24 customers to handle - do not offer much scope for growth of the groundhandling business.
Or, we should prepare for price war - and TAA should get prepared for losses - considering the fact that the authority's revenues depend on the percentage earnings of groundhandling services providers. Instead of thinking of bringing in a third player in the market, TAA should focus on creating a conducive environment for attracting more airlines.
Q: How can competition be detrimental to your business?
A: While we believe competition in general is healthy, we also feel that too much competition in groundhandling is detrimental to the quality and safety of the services. Limited competition benefits customers by giving them an option to choose from - and making players work harder to provide better services and prices - both fundamentals of a free and competitive market.
However, increased competition may lead to reduced investments that adversely affect quality and safety at the airports in the country. As the environment becomes more competitive, ethical business behaviour is crucial and should be allowed to take its course. This calls for monitoring of the players' behaviour by the regulators.
This is crucial because the aviation industry in Tanzania is growing, and should be nurtured by proper regulation.
Q: How do you manage the competition?
A: In 2016, Nas-Dar Airco made history by becoming the second groundhandling company to operate in Tanzania for the first time in 30 years of Swissport's monopoly. As one of only two groundhandlers at the airport, we delivered comprehensive groundhandling services by controlling our costs and driving investments into two essential areas: equipment and people.
Our operations are reinforced by a fleet of 300 ground support equipment, with continued investments in infrastructure and equipment, talent development and training, technology, and safety. The investment, which to-date stands at $12 million (about Sh27.6 billion), was to enhance the provision of quality services at different airports in the country.
Q: How many customers do you have?
A: We are handling six out of the 24 airlines in the industry: Air Tanzania Company Limited (ATCL), Precision Air, RwandAir, Ethiopian Airlines, Fly Dubai, KLM and Air France. Nas has received appreciation from the United Arab Emirate (UAE) Civil Aviation for outstanding performance in the regulatory audit conducted in April 2019. The Civil Aviation Safety Inspector said the ground operations standard, control, administration and staff competence that were audited and observed exceeded what was required from the ground operations regulatory requirements and best industry practices.
Q: How many flights and passengers have you handled in 2019?
A: So far this year, Nas-Dar Airco has handled 8,900 flights and 1.2 million passengers. This number is over 100 percent compared to last year.
Q: How many workers have been employed by Nas-Dar Airco?
A: The number of employees grew by 117.9 percent this year compared to last year. We now have 353 employees.
Q: How do you give back to society?
A: As a socially responsible company, Nas drives efforts to give back to communities in Tanzania with a focus on education, health and tourism promotion. This includes running an internship programme to train Tanzanian youth for alternative careers in aviation, and offer better opportunities for further employment.
Since April this year, a total of 62 interns have been trained and ten percent of them are already employed. A few months ago, we contributed Sh50 million for the construction of staff housing for Kilolo District Hospital.
Nas is currently working with the Tanzania Tourist Board (TTB) to promote Tanzania across more than 45 Nas Group-operated lounges in Africa, Asia and the Middle East.
Nas participates in the promotion of Tanzania's tourism inside and outside the country, passes tourism information to passengers; develops awareness on the tourist attractions to both locals and foreigners.
Lastly, Nas needs to collaborate in the exchange of skills and knowledge between the parties with a view to enhancing the image of Tanzania. For Year-2020, another Sh40 million has been allocated to build and renovate primary schools in Mkuranga through the 'African Reflections Foundation'.
Q: In your opinion: will the 'Blueprint' be pivotal in improving the aviation industry?
A: Implementation of the 'Blueprint' is a sign of the government's readiness to increase the 'ease of doing business' and reduce compliance costs. Meanwhile, the government's initiatives in renovating airports countrywide is an avenue for growing demand of the groundhandling services in Tanzania.