TAA braces for ground handling 'war'

The authority’s director general, Mr Julius Ndyamukama.

Dar es Salaam. The Tanzania Airports Authority (TAA) is working to shield itself from the impact of a possible price war attributable to intense competition in the ground handling business.

The authority’s director general, Mr Julius Ndyamukama, told The Citizen that they had plans on the cards to set a minimum rate of concession fee, which is currently charged as a percentage of ground handlers’ earnings.

This suggests that it is ground handlers who are to suffer in case of a price war because - regardless of their performance - they would have to pay to TAA a certain fixed amount or more.

Ground handlers were likely to pass the burden on to their customers (airlines), to avoid a drop in their revenues and profit margins.

Currently, the market at the Julius Nyerere International Airport (JNIA) dominated by Swissport Tanzania and Nas-Dar Airco.

Last year, the Tanzania Civil Aviation Authority (TCAA) issued a five-year operating licence to Celebi Tanzania Aviation Services Ltd and Union National Holdings Ltd to provide ground handling services.

They are now waiting for concession from TAA so that they can be able to operate at JNIA.

TAA announced the concession tender in mid-December last year that would see to the selection of three winners out of those expected to take part in the tender.

But, yesterday, Mr Ndyamukama told The Citizen that they had extended the tendering date to March this year on the ground that the authority’s procurement section is somewhat congested. “We are about to form a team that will arrange the minimum concession fee so that we can do away with a price war’s repercussion on our revenues,” he noted.

Nas-Dar Airco general manager Miguel Serra said they were paying 10, 12 and 15 per cent of their earnings as airport concession fee in Dodoma, JNIA and Kilimanjaro respectively.

Celebi director Gaudence Temu welcomed the plan to set minimum rates.

He said it was fine that the authority was trying to come up with the formula that would help to ensure that the government’s revenues are not affected.

Mr Temu was optimistic the authority would involve stakeholders so that the plan could be discussed fully and the decision to be taken took on board their views.

However, he cautioned that it was also important to ensure that the industry is not over-regulated.

“In my opinion, as long as it is reasonable, it is fine to set a minimum cap but it is important to give a room for ground handlers to negotiate rates with airlines,” opined Mr Temu. Nas-Dar Airco general manager Miguel Serra said having a third ground handling operator at JNIA will be counter-productive to the sub-sector with about 24 customers.

“The decision shall harm government earnings and financial performance of the existing ground handlers, reduced investment and lower employment,” Mr Serra told The Citizen on Friday.

He said most of regional airports had one ground handler or two, except Nairobi, which had five.

“A number of these ground handlers are struggling to cope with the competition due to small size of the market,” said Mr Serra.

“We recommend for TAA to engage International Air Transport Association (Iata) to give technical and practical recommendations with regard to the situation of having more than two Operators.”

Swissport CEO Mrisho Yassin was not available for comment due to his tight schedule.

But in the interview held late last year with The Citizen, Mr Mrisho said due to tactical price dumping, business had been in a decline trend for some two years and would continue to deteriorate throughout the year (2019).

He said the estimated value of loss was likely to between $2.5 million (Sh5.7 billion) and $3.5 million (Sh7.9 billion).