Travel 

Friday, November 29, 2013 

Precision Air Chairman remains positive about fu

Precision Air, one of the fast growing airlines in the region has recorded a tremendously growth of its assets in seven years despite the challenges it faced early this year.
The airline said, during the period of 2006 to March 2013, the company’s total assets increased more than ten-fold to Tsh276 billion ($171.08 million) from Tsh23 billion ($14.32 million).
Precision Air’s Board Chairman, Michael Shirima told East African Business Week during the Annual General Meeting in Dar es Salaam last week that his airline predicts bright future ahead with five-year strategic plan.
“The growth of assets was at par with the growth of the company’s capacity to airlift more passengers,” Shirima said.
Shirima said from moving 340,000 passengers in 2006 to 896,000 passengers in 2013 is not a small achievement.
Indeed he added, moving a total of close to 5 million passengers over this period, all arriving at their respective destinations in “one piece” is an enviable feat.
He said the company’s half year results (unaudited) for the period April to Sept this year indicates a very positive outlook with the actual results in line with the strategic plan.

“Unfortunately, growth in the number of passengers did not translate into profitability growth for reasons some of which are pointed out below,” he lamented.
The reported loss in 2013 brings down the average net profit margin for the past 8 years to just one (1) per cent,” he added.
He said the company is now focused to remain a profit making company even after posting a Tsh30 billion ($18.67 million) loss during the year ending March 31st 2013.
He noted, the airline has weathered the storm of the past few years and remained intact amid challenging environment of soaring jet fuel prices and slowdown of the global economy.
“Amid this challenging environment, the airline recorded a loss of billion of shillings for the year ending March 31st 2013. Prior to this loss, the company had posted an average of a net profit margin of 4% for the preceding seven years,” he noted.
He said the company’s management foresaw these challenges and oncoming storms and acted proactively to steer the company clear of turbulences adding that one of the steps deployed was seeking long-term capital.
The company made a net loss of Tshs.30.4billion against prior year which stood at Tshs.1.2billion profit.Overall the Available Seat Kilometers grew by 10% whereas the Revenue Seat Kilometers grew by 16%. Total numbers of passengers uplifted over the period went up by 8.5% to 895,650 against 825,150 prior year. The yield however declined by 9.4%.

Total Revenues grew by 8.2% to Tshs.176.4billion largely driven by increased passenger numbers. This robust growth in passengers was attained even with
increased competition in the domestic market.Direct Expenditures went up by 24% to Tshs 145billion due to increased cost of fueland increased equipment related costs. Aircraft Maintenance costs increased from Tshs.11.9billion in 2011 to Tshs.23.6billion in 2012; this was mainly due to the high costs of maintaining the Boeing 737 Fleet.
The gross profit margin therefore declined from 28percent in the prior year to 18% (Tshs.31billion against Tshs.46billion prior year).
The Indirect Expenditure grew by 18.6% to Tshs.42billion, driven mainly by staff related costs that went up by 8% to Tshs.28.5billion against Tshs.26.4billion.Financing Costs grew by 8% due to overdrafts whereas the company accrued a loss in foreign currency exchange of Tshs.4.4billion which is a 50% growth over prior year.

This is largely related to US dollar denominated borrowings for aircraft financing.
Loss on impairment of receivables grew to Tshs.8.6billion from Tsh.0.3billion, due to addition provisions made in relation to other carriers billing rejections that were unprocessed by year end.
The net effect was a loss of Tshs.30.4billion against a profit of Tshs.1.2billion prior year.
Considering the performance, the group recognized the need to execute a turnaround.

Towards that end, the Board has made changes in Top Management which has developed a new 5 year Strategic Plan already approved by the Board.
The plan is focusing on among other things Network Rationalization (pruning of non-profitable routes) and  Fleet Rationalization (Termination of expensive fleet such as Boeing 737 aircraft.

By Leonard Magomba, Friday, November 29th, 2013