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Kenyan who gave Precision Air wings to soar higher

BUSINESS
By Phillip Mwakio | July 21st 2013

By  Philip Mwakio

Kenya: After 10 years at the helm of Precision Air, Tanzania premier airline, as the Chief Executive Officer, Mr Alfonse Kioko, retired from the carrier on March 5, 2013.

Mr Kioko, a Kenyan, shared his experiences in this competitive business. “My tenure at Precision Air (PW) can be described as nothing less than a roller coaster in many ways,” he told The Standard on Sunday. He joined the airline on March 5, 2003, a year when national carrier, Kenya Airways (KQ) bought 49 per cent in Precision Air. The airline was a little known family-run business at the time.

“Though I had done 13 years in the aviation sector prior to this appointment, I have to confess that I didn’t know of Precision Air!’’ he said. Founded by Mr Michael Shirima, who previously worked for the East African Airways and Air Tanzania, the airline’s head office was in Arusha and at the time it was struggling to remain afloat. Kioko says staff strength was less than 100, with most of them coming from around Arusha and the northern region.

“Because of this the airline was labeled a northern region outfit and run by people from the north. This was one of my major challenges. I had to work hard to convince people to see it as a Tanzanian carrier rather than a tribal owned firm,” he said.

Highly competitive

He concedes that aviation business is highly specialised and skilled manpower was a big challenge as well. That meant that one had to fold their sleeves and go to work irrespective of seniority.

The fleet composition at the time, Kioko said was a seven-seater one engine Cessna 207, one seven-seater Cessna 402, two eleven-seater Cessna 404s and the nineteen-seater LET 410 and later ATR42-300. “Often scheduled flights would be disrupted to pave way for quick buck from charter flights,’’ the aviation expert said.

Unknown to many and devoid of any encumbered tangible assets to use as security, the company had a very weak financial base.  The money that KQ paid to purchase the 49 per cent stake went into the pockets of the initial investors. No single cent was put into operations.

“Indeed the due diligence report done by KQ in 2002 prior to investing into PW clearly stipulated that although the company had great potential, it could become viable only after a capital injection of $12 million,’’ he noted.

 Without this cash, the company was set for major tribulations. Kioko concedes to date that sadly this capital injection was never done. “I inherited a company with very weak capital base, problems of cashflow, no assets to use as security to secure loans, unskilled manpower and a myriad of other challenges,’’ he said. With Kioko at the top, he set out to turnaround the fortunes of the airline in a highly competitive market. The carrier has now grown to effectively acquire the tag of Tanzania’s unofficial national carrier.

“As the new MD & CEO, I had the option of sitting and lamenting about all those challenges and perhaps blaming them on my predecessor or acknowledging the situation and looking for solutions,’’ he said. He chose the pretty path of looking for immediate solutions. Despite all these challenges, we grew the company to a level where it was not only known and appreciated in Africa but also internationally.

 “In my 10 years at the helm of PW I made no loss...despite taking off with weak cash flow,” Kioko who has since returned to Kenya said.

 He is full of praise to a very good team and supportive board under chairman Shirima and loyal customers who opted to support PW throughout his stay at the firm.

“It was for this reason that whatever I did, the board was fully involved,” said Alfonse who bid goodbye to Precision top seat on March 5, 2013.In 2010 when his contract expired, he decided not to renew his contract for the five years that the board wanted him to. “At the time I informed them that I needed only a year to groom my successor as seven years in the same airline was too long. The board did not accept my proposal. It took a lot of persuasion for me to finally sign three more years.” The new contract ran upto March 5, 2013.  This meant my notice to PW was actually 3 years!

 Suitable position

But in between something else also happened. “Since I had been seconded to PW by KQ, ideally I was still a KQ employee, hence after the expiry of my contract with PW, I would have gone back to KQ,” he added.  “With the current set up in KQ, I did not foresee a suitable position for me. When KQ introduced the Voluntary Early Retirement (VER) in August 2012, I applied and my application was approved. I therefore retired from KQ on September 3, 2012. I had to sign another short term contract with PW running until the day I disengaged.”

 Kioko is credited for having helped PW expand its network, modernise its fleet and build a ultra modern hangar, that cost the company $5.7 million.  Prior to this, PW was utilising an old government hangar. Further he negotiated with ATR aircraft manufacturers, Government of France and a university in Tolouse (aero spatial) for scholarships in leadership and maintenance for PW staff.  By March this year, more than six staff had gotten their MBA and more than 24 technicians had trained in France at no cost to the airline. “I believe in growth since without it you stagnate,” Mr Kioko said.

Of course the risk here is overtrading and managing the growth. Other people may believe in shrinking the business, with the risk of downsizing operations and possibly causing redundancies. Different leaders would deploy different strategies to achieve their goals. There is really no clear-cut solution. On December 21, 2011, PW made history by being the first airline in Tanzania to list at the Dar es Salaam Stock Exchange with a total of 7,056 investors who took part in the Initial Public Offering (IPO). During the IPO, the airline raised Tsh12 billion, which was a subscription of 43.18 per cent, most taken up by Tanzanian nationals.

“This as far as I remembered was the initial external capital to be injected into the company, since I took over...most of the time we relied on revenue we generated and bank loans,” Kioko said.

Asked about what kept him awake at night, Mr Kioko said, “Steering any business with no strong financial base could be a nightmare.”  “Throughout my tenure, cashflow was always a major concern and this gave me sleepless nights.  Remember ‘cash is king’.”

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