KQ to sell 15 pc stake in Tanzania’s Precision Air
A PrecisionAir Boeing aircraft at the Julius Nyerere International Airport in Dar es Salaam. Photo/LEONARD MAGOMBA
In the first sign of a flurry of cross-border deals to come, PrecisionAir has announced plans to cross-list on the Dar es Salaam and Nairobi stock exchanges.
The deal, which will see Kenya Airways sell 15 per cent of the 49 per cent stake it holds in PrecisionAir to investors in Tanzania by the end of the year, also ties in with the Tanzanian associate company’s ambition to base its ambitious regional expansion around its Dar es Salaam hub.
Kenya Airways is already cross-listed in Nairobi and Dar.
With the growing commercial success of both Kenya Airways and PrecisionAir as the East African Community enters into a Common Market, the listing brings onto centrestage the debate over whether the region should move to a one-sky policy.
Such a move would significantly increase the frequency of flights offered by regional carriers and reduce inter-city prices.
It could also attract billions of dollars in cross-border investments in regional aviation businesses as the volume of trade and business increases.
PrecisionAir’s IPO — coming as it does in the context of Tanzania’s elusive political and commercial quest to revitalise its troubled national carrier and make Dar es Salaam an aviation hub to compare with Nairobi or Johannesburg — caps what is arguably the most successful business partnership between a Tanzanian and a Kenyan company in the past decade.
Despite the revival of the East African Community a decade ago, which sparked a dramatic increase in regional investments, business relations between Kenyan and Tanzanian firms have often mirrored the prickly political relationship between the two countries.
Indeed, Kenya Airways’ investment in PrecisionAir, which in 2003 was a small but ambitious domestic carrier, came only after the Kenyan national carrier’s controversial bid for Air Tanzania had failed.
Kenya Airways took PrecisionAir under its wing, helping build its management depth and modernise its fleet. Local management helped navigate the sometimes choppy political waters of entrenched resource and commercial nationalism.
PrecisionAir is a Tanzanian-founded airline operating scheduled domestic and international flights; as Tanzania’s largest private-owned airline, it today serves as a proxy national carrier without the flag.
The national carrier, Air Tanzania, has continued to make losses under a succession of South African and Chinese foreign investors, with Zimbabwe Air recently taking up the baton.
The airline group is now gearing to raise capital to support its aggressive expansion plans and further enhance its presence in Africa.
In a strategy unveiled last week, Precision Air will connect all the major cities in the region and expand its route network farther afield into South Africa, Angola, DR Congo, Zambia and Zimbabwe.
Michael Shirima, chairman of PrecisionAir, told The EastAfrican in Dar es Salaam last week that the IPO will increase Tanzanians’ ownership of the carrier from the present 51 per cent to 66 per cent, leaving 34 per cent in the hands of Kenya Airways.
Mr Shirima said the shareholders have made an application to the Tanzania Capital Market and Securities Authority to authorise the airline to list on the Dar es Salaam Stock Exchange.
“We want to extend our network to the SADC and EAC countries, and explore the strong potential of forming a hub in Dar es Salaam,” he said.
Gabriel Kitua, chief executive officer of the Dar es Salaam Stock Exchange, told The EastAfrican last week that PrecisionAir has already finalised discussion with the DSE for listing on the bourse.
