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Precision Air faces court battle over $26 million debt
What you need to know:
- Tanzanian airline Precision Air is embroiled in a legal dispute with Export Development Canada (EDC) over an alleged debt of nearly $26 million.
Dar es Salaam. Export Development Canada (EDC) has filed a lawsuit in the UK High Court, dragging Precision Air through the legal system and claiming it owes around $26 million under an aircraft finance agreement.
According to reports, in late 2012, the Canadian Export Credit Agency (ECA) provided direct financing, enabling Tanzanian aviation firm Precision Air to purchase two model 42-600 jets from French-Italian manufacturer ATR.
The deal was structured to involve a special-purpose vehicle, Antelope Leasing, which acted as the borrower and held the aircraft as collateral on behalf of EDC.
Precision Air was obliged to make rental payments for the aircraft, and in time, the legal title for the planes was to be transferred to the airline once the loans were fully repaid.
But as revealed in filings made to the UK High Court in December, the Tanzanian company defaulted on its payments to EDC under the lease facility and has ignored multiple requests to pay since 2021.
When contacted, Precision Air's Corporate Affairs Manager, Mr Hillary Mremi, acknowledged the matter but declined to comment.
"The management is aware, and is actively working on it. But we are not ready to comment any further for now," said Mremi.
EDC is seeking $13 million under a leasing deal for the first aircraft, which covers unpaid rent of $11.7 million and a termination sum of $1.3 million.
For the second jet, EDC alleges it is due nearly $11.3 million in unpaid rent and a termination payment of over $1.6 million. In total, it aims to claw back nearly $26 million.
In a financial statement signed and dated September 2022, the firm said the planes have largely been out of service, and the firm was in the process of “reviving the aircraft for returning to [the] lessor.”.
“These aircraft have been grounded since 2017 due to technical issues, and they are not part of the active fleet,” it added.
An EDC spokesperson declined to comment when asked by GTR about the current location of the two ATR jets. “At this time, we are limited in what we can share,” they said.
EDC’s support, typically cheaper than commercial bank financing, backed the sale of equipment by Pratt & Whitney, a North American engine manufacturer with facilities in Canada.
The deal also propped up a fleet modernization programme at Precision Air, with the firm’s website still touting the fact it was the “first airline in the world” to operate the 42-600 model of ATR aircraft.
Precision Air was founded in 1993 and serves destinations across Tanzania, Kenya, and the Comoros. Today, it is partly owned by Kenya Airways, which holds a 41 percent stake.
In recent years, the East African firm has suffered from financial as well as reputational difficulties.
Recently, there have been legal wrangles with Tanzanian airline companies, including Air Tanzania Limited (ATCL), after its jetliner was seized in Johannesburg, South Africa, in 2019 after a decade-long legal tussle between the Tanzanian government and a retired white farmer.
Another plane belonging to Air Tanzania Company Limited (ATCL) was also seized in the Netherlands in 2022 after a Swedish firm won a $165 million award against Tanzania due to a revoked land title in the Bagamoyo sugar project.
In 2023, an exploration company targeted ATCL aeroplanes to persuade the Tanzanian government to pay close to $100 million in reparations for a failed nickel project.
The company claims to have lost millions in a nickel project in the country and is therefore seeking significant compensation from the government.
