KENYA AIRWAYS BECOMES THE MAJORITY SHAREHOLDER OF PRECISION AIR

Kenya Airways will now the major shareholder of Precision Air with 49 percent after agreeing to inject $ 10 million into the Tanzania’s Airline in a bailout plan.

“Kenya Airways’ decision to inject $ 10 million into Precision Air is subject to approval by various regulatory bodies,” Precision Air chief executive Sauda Rajab said.

The capital injection will keep Precision Air’s turnaround strategy on course, given that it could only raise half of its target in an initial public offering (IPO).

However, the funding still falls short of the $ 33 million that Precision Air had indicated it needed to shore up its cash position and settle outstanding debts to creditors, including the Tanzanian government.

Ms Rajab said KQ agreed to the injection on condition that the airline would sell or lease back five of its remaining nine aircraft, retrench more than a fifth of its staff, outsource some functions and draw up a plan to reduce debts while improving cash flow.

Airlines normally sell their aircraft and immediately lease them back as a way of freeing up cash, in a transaction known as a sale-lease back.

The airline has already cancelled its Dar es Salaam-Johannesburg, Dar-Mombasa, Dar-Lubumbashi-Lusaka and Dar-Mbeya routes, which were making losses.