Lessons from the Past – Part II: How the Government Destroyed ATC by Not Listening…

Boeing and the United Republic of Tanzania have confirmed an order for one 787-8 Dreamliner, valued at $224.6 million at list prices. The aircraft will be operated by Air Tanzania, the flag carrier of Tanzania. The order was previously attributed to an unidentified customer on Boeing’s Orders & Deliveries website.
Air Tanzania Company Limited is the flag carrier of Tanzania based in Dar es Salaam with its hub at Julius Nyerere International Airport and currently flies to destinations in Tanzania with a growing fleet of airplanes.
Image: Boeing.


By Jaston Binala.


Air Tanzania Company Limited (ATCL) is currently moving on a growth trajectory according to its Chief Executive Officer, Eng. Ladislaus Matindi.  But research suggests the state owned airline must abandon its socialist-era management style to succeed from this point onward.

The airline, established in 1977 as Air Tanzania Corporation (ATC), collapsed in the 1990s. An independent taskforce formed by the Tanzania Minister for Transport and Communications in 2009 established it

MIAMI — Air Tanzania has been disclosed as a previously unidentified customer for a single Boeing 787-8, valued at $224.6 million at list prices.
The order follows private meetings that Jim Deboo, Africa region sales and marketing director for Boeing, held with John Magufuli, president of the United Republic of Tanzania during a visit.
“The 787 Dreamliner will be the flagship aircraft as we renew and grow the Air Tanzania fleet. We aim to establish our long­haul capability by starting flights to Europe, Asia and the United States over the coming years and the 787 is the perfect aircraft to achieve this ambition,” the airline said in a statement.
The announcement is the latest in a series of aircraft acquisitions for Air Tanzania. Last December 2, the carrier announced a firm order for two Bombardier CS300s and two Q400s turboprops, and earlier this year, the carrier took delivery of two Q400s with an all­economy, 76­seat cabin configuration.
Air Tanzania is the flag carrier of Tanzania, based in Julius Nyerere International Airport ni Dar es Salaam, and currently flies to several domestic destinations.
The acquisition of these new aircraft is part of a turn­around plan for the company, intended to serve as a tool to transform the country into a regional transportation hub while boosting the tourism industry of the country, which currently brings in around $2 billion a year.

failed “because it was not operating entrepreneurially.”  It was revived in 2016 with a slight change to its name when the Government purchased two new aeroplanes.

Eng. Matindi has said in Dar es Salaam that the airline’s fleet is to be increased from three to four aircraft by June 2017, servicing local destinations as international destinations are planned for June 2018.  He  is seeing the company on a growth trajectory.

The CEO’s excitement resonates with that of the Tanzania President John Pombe Magufuli  who was equally enthusiastic about the airline’s future during re-launch in 2016.   The airline is still 100% government owned, revived by purchase of two Bombardier Q400 NextGen  aircraft from Canada, bought with hard cash at a cost of 46.6 million US dollars (over 90bn/-).

The President affirmed the government had also allocated money for purchase of another two aircraft, a 160-seater aircraft and another plane with capacity to carry over 240 passengers. All to be bought with hard cash.

In a statement during the re-launch in 2016 President Magufuli said “if we purchase the aircraft that carries 240 passengers, customers will be assured of direct flights from Dar es Salaam to China or US and our tourists from China, US, Russia, Germany and other countries will comfortably arrive in our country.”

Respondents in a small research project suggested the ownership structure of this airline should change if it is to survive this time. Paul Chizi, a businessman in Dar es Salaam who worked as ATC Chief Executive Officer during its dying days in the 1990s believes spreading out ownership  of this airline will guarantee its survival, instead of limiting ownership to the government as sole proprietor as was the case in the past.

“Ownership of this airline must now  include shareholding by key stakeholders like Tanzania National Parks (TANAPA), Ngorongoro Conservation ,and pension funds through which employees of the organisations would own shares through the funds,” Chizi said. “This would enhance loyalty to the carrier!” Research showed employees did not show sufficient care for the airline in the past.

Mr. Chizi also believes a patriotic stakeholders meeting called to discuss the airline  for collecting suggestions on improving its management might be of great use.

Additional research respondents included other former ATC  members of staff, some  current members of staff as well as some Ministry of Transport and Communications  members of staff.  Some of the interviewees included Rogatian Mfinanga, Shaaban Mtambalike and Jones Msokwa, both holding senior management positions in the previous  ATC.

Innocent Prim Mungy, who held the position of Public Relations Manager during  the airline’s dying days,  shared an opinion with Paul Chizi who believes  one of the Government’s biggest mistakes contributing to the airline’s failure was ignoring workers–the failure to heed to workers’ opinions on the direction of the management of the airline.

ATC was among some 400 government-owned enterprises earmarked for privatization in the 1990s as a recommendation of Breton Woods institutions–the International Monetary Fund (IMF) and World Bank. Privatizations were paraded as  the only way to revive poor performing  parastatals. The Government swallowed this privatization pill ‘whole’ against the workers will who fretted unemployment.

ATC employees argued against the Government privatization plan for the airline, providing alternative methods of its revival.  But the government put ear-plugs in its ears; But it is now clear some Bretton Woods ideas don’t work.

The workers advised the Government (the sole proprietor at the time) against accepting South African Airways  (SAA) as a shareholder in ATC with access to everything; the workers shouted as loud as they could to sell the view that a route sharing agreement similar to the KLM-Kenya Airways agreement was better than an deepened joint venture with  a competitor who would get access into your internal  operations. The Government disagreed.

In 1995, when poor financial management and loss making routes became evident, ATC was forced to suspend most of its routes. The routes were taken over by a joint venture airline of South African Airways  and the Uganda and Tanzania flag carriers. The joint venture airline was called, African Joint Air Service (AJAS).

The objectives of this joint airline included the intention to generate employment, create a bigger market for the three member countries, and to reap overall economies of scale. But, in the five years of its existence the airline turned out to be running at a loss. Instead of complementing the national airlines of Uganda and Tanzania, Alliance Air began to compete against the two carriers.  SAA proved to be the competitor workers feared, and not a joint venture partner.

DAHACO, the cargo handling department of the airline was the only productive arm of the airline during this time.  ATC workers advised the Government against disposing off this business wing to the private sector on the ground it carried capacity to sustain the company, and that there was no good reason to dispose off that profitable side-line venture because this would be creating unemployment for no good reason. DAHACO  was sold off because Breton Woods institutions wanted it sold.

ATC workers protested against selling off Jet Club–the recreational wing of the airline,  because it was a profitable side-line business, too. The government refused to honour that plea as well because selling off Jet Club to the private sector was politically correct.

Eng. Ladislaus Matindi

Successful companies listen to workers opinions and act upon them because workers might know something the owner does not know. Management in successful corporations is non-political, management encourages innovation, a mechanism is created to allow the non-bureaucratic free flow of information from top to bottom and vice versa. The workers’ opinions are given serious consideration.

In an entrepreneurial corporate body, employees are encouraged to behave as entrepreneurs by inventing new venture ideas, new designs, while they have the resources, capabilities and security of the larger firm to draw upon.  It is basically permission to treat the corporate body as their own entreprise.

DAHACO was formed in 1983 during the  productive period between 1981 and 1986 when the corporation was under Harith Bakari Mwapachu. DAHACO  was in effect an entrepreneurial innovation of the airline snatched away from its ‘true owners’ by political business naivety.

Capitalism allows workers to own an enterprise.  The Government failed to see this possibility. A recent report from Japan  says  many Japanese companies  have introduced employee stock ownership plans as a way to reward and motivate their workers; and a live example is given.  Every year, Japanese snack maker Calbee holds a ceremony recognizing employees who have made outstanding contributions to the company’s earnings.

Starting from fiscal year 2015, the company has added a new prize: 500 Calbee shares for the top performer.  The most recent prize went to Masaya Kawase, a 40-year-old sales representative. He sells Calbee products to retailers, including major discount store chain operator Don Quijote Holdings, and helped boost sales by 700 million yen ($5.91 million) in one year. The company gave him part ownership in shares as a reward.

The United States of America is among hallmarks of capitalism on earth. Companies have permitted employees ownership for years. Qualified employees include all full- as well as part-time employees. The concept allowing employees to own shares of their companies dates back to the mid-19th century — before days of  what they call Social Security – to safeguard  people who would no longer have any income after becoming too old to work.

Business owners decided it would be a good idea to set aside stock for their employees as an incentive to work hard and dedicate themselves to their jobs over  the long term.

Some open data sources  say today there are approximately 11,300 companies in the U.S. that are structured under the Employee Stock-Ownership Plan (ESOP). Under an ESOP, a company sets up a trust fund, buys shares with that money, then distributes the shares to its employees periodically.

When an employee decides to leave the company, the company buys back the shares at a fair market price, allowing the employee to cash out with whatever amount of stock accumulated over the years.