Tanzania's Precision Air (PW) has confirmed sustaining a hefty loss of TZS30.4billion (USD18.84million) for its most recent 2012/13 Financial Year ended March 31, 2013. In their statement, the the Board of Directors of Precision Air Services Plc said that while total revenues had grown by 8.2% on the previous years figures to TZS176.4billion (USD109.3million), the loss was attributable to rising fuel, maintenance and equipment costs, rising personnel expenditure and an unfavourable USD exchange rate also taking its toll.
According to the carrier, despite increased domestic competition, the rise in revenue was driven by increased passenger traffic which was up 8.5% to 895,650 against 825,150 last year. Overall Available Seat Kilometers (ASKs), reflecting network seat capacity, grew by 10% whereas Revenue Seat Kilometers, reflecting actual traffic, grew by 16%. However, yield declined by 9.4%.
In terms of expenditure, Precision Air stated that its so-called "Direct Expenditures" rose 24% to TZS145billion due to the increased cost of fuel
and equipment-related costs. Aircraft Maintenance costs increased from
TZS11.9billion in 2011 to TZS23.6billion in 2012; mainly attributed to the high
maintenance costs its now disposed of B737-300 fleet.
The gross profit margin therefore declined from 28% on the previous year to 18%
(TZS31billion against TZS46billion in FY2011/12).
The Tanzanian regional carrier's "Indirect Expenditure" also grew by 18.6% to TZS42billion, driven mainly by staff
related costs that went up by 8% to TZS28.5billion against TZS26.4billion.
Financing Costs grew by 8% due to bank overdrafts whereas the company accrued a loss in
foreign currency exchange of TZS.4.4billion up 50% on last year attributed mainly to US Dollar denominated aircraft lease contracts.
The company also says loss on impairment of receivables grew to TZS8.6billion from TZS0.3billion the previous year due to additional provisions made in relation to other carriers billing rejections that were unprocessed by year end.
Overall, the net effect was a loss of TZS30.4billion against a profit of TZS1.2billion in 2012.
“Considering the performance, the group recognised the need to execute a turnaround. Towards that end, the board has made changes in the top management which has developed a new 5 year strategic plan already approved by the board,” said the statement issued by Michael Shirima, the chairman, and Sauda Rajab, group managing director & CEO.
The plan is focusing on the following:
- Network Rationalization (pruning of non-profitable routes)
- Fleet Rationalization (Termination of expensive fleet such as Boeing 737 aircraft leases).
- Operations & Structure:- includes Staff Retrenchment and Internal Efficiencies
- Revenue Enhancement Opportunities;- includes Third Party Maintenance, and Third Party Advertising.
Mr Shirima had previously singled out the failure of the airline's 2012 IPO on the Dar es Salaam stock exchange to attract sufficient investment as having been a decisive factor in this year's losses stating that the airline had expected pension funds to have bought into the company. Their choice not to do so, he said, had severely curtailed the airline's cash flow leaving it with TZS218billion (USD136million) worth of order with ATR (including four ATR42-600s and one ATR72-600) to pay for.
Download the original Financial Statement for Precision Air's FY 2012/13 here.