CAG flags prolonged grounding of four ATCL aircraft, soaring debts

According to CAG Charles Kichere, the Airbus A220s remained unused largely due to poor post-sale maintenance support, including delays in the delivery of engine parts and other critical components.

“These aircraft were manufactured with limited after-sales support services, which significantly hampered their operations,” the CAG stated.

During the 2023/24 financial year alone, ATCL incurred Sh9.16 billion in fixed costs related to the grounded aircraft. However, the airline managed to recover only Sh5.49 billion from the Government Flight Agency in the form of leasing incentives—covering just 60 percent of the costs.

The report attributes this situation to inadequate feasibility assessments prior to purchase and the airline’s failure to enforce warranty terms on engine repairs.

“As a result, the airline is shouldering avoidable costs that could have been covered under warranty provisions,” Kichere said.

The CAG has recommended that ATCL, in collaboration with the Government Flight Agency, conduct a full technical review of the Airbus A220 fleet and consider whether they are still suitable for the national airline’s operational model.

The airline is also urged to re-evaluate its aircraft selection criteria, factoring in long-term viability, cost efficiency, and compatibility with Tanzania’s operating environment.

The audit also unearthed another costly concern: Sh20.63 billion was spent on maintaining and insuring a DASH 8 Q300 aircraft (registration 5H-MWF) that has remained grounded for over seven years.

The plane was sent to Malta for maintenance in November 2020, but despite years of effort and mounting costs, the aircraft has not returned to service. According to the CAG, the aircraft’s outdated design and difficulty in sourcing parts contributed to the prolonged grounding.

“ATCL failed to assess the economic feasibility of restoring the aircraft before committing significant resources,” the report noted.

This, the audit says, has caused not only direct financial losses but also reduced the airline’s operational capacity at a time when it seeks to position itself as a growing regional player.

The CAG recommends a reassessment of the aircraft’s market viability and its potential for future operations, especially considering part availability and current aviation market dynamics.

Lease arrears skyrocket to Sh369 Billion

ATCL’s financial woes extend beyond grounded aircraft. The audit reveals that the airline’s unpaid lease fees to the Government Flight Agency ballooned from Sh27.89 billion in 2018 to Sh369.13 billion by the end of June 2024.

This represents a 13-fold increase in just six years and accounts for 63 percent of the airline’s total reported liabilities, which stood at Sh595 billion.

“The accumulation of lease arrears was driven by high operational and maintenance costs and persistent financial losses over six consecutive years,” the CAG reported.

Clause 4.1 of the lease agreements mandates fixed monthly payments from ATCL to the Government Flight Agency. However, the audit warns that continued defaults could further undermine the airline’s financial health.

To address this, the CAG has recommended that ATCL and the Government Flight Agency develop a clear debt management strategy. This may include restructuring lease obligations, revising payment terms, and lowering monthly charges to create a sustainable path forward for the national carrier.

The audit calls for greater collaboration between ATCL and government stakeholders, especially on procurement, contract enforcement, and operational planning, to safeguard public funds and secure the future of Tanzania’s national airline.