Precision Air may reverses loss trend

Precision Air (PW) has suffered over 30bn/- loss in this year, but market analysts remain optimistic that a Dar es Salaam Stock Exchange (DSE) listed airline can reverse the loss making trend if it improves corporate governance and cuts unnecessary expenses.

The fact that the airline managed to increase the number of passengers by 8.5 per cent to 895,650 from 825,150 in the previous year despite the stiff competition, analysts say, was an indication that the firm can curb the loss making problem.

Orbit Securities Head of Dealings and Operations, Juventus Simon, said in Dar es Salaam that the airline would make a good turnaround in the next two years to post positive results.

“The airlines business is tricky and risky…the trend shows that regionally not only Precision Air but strongest airlines like Kenya Airways also succumbed to loses,” Mr Simon said, noting that critical analysis of Precision Air shows that expenses are the major problem of the firm.

Direct expenditures grew by 24 per cent to 145bn/- during the period under review due to what the management has attributed to rising fuel and equipment related costs. The share of Precision Air which has recorded loss for the first time in its 20 years of operations, closed the market on Wednesday at 475/-, an appreciation of 3.26 per cent since the beginning of the year.

Stockbrokers, however, said there were more share offers against relatively low demand. Zan Securities Chief Executive Officer, Raphael Masumbuko told the ‘Daily News’ in an interview that investors were expecting the airline to perform poorly due to increasing market competition from FastJet.

“The performance is not attractive, but the good thing is the airline has maintained its market leadership,” he said. 

The airline said in its statement that considering the poor performance, the group has executed a turnaround strategy that included changing the top management.

“So far, the actions taken have yielded positive results,” says the statement signed by the airline Chairman Michael Shirima and Group Chief Executive Officer Sauda Rajab. 

Precision Air was reported to be in a financial turmoil and desperately in need of a 32 million US dollars (about 51.2bn/-) bailout package to enable it to meet urgent cash obligations that include servicing bank loans and paying aircraft suppliers.

The airline flies through tough times due to huge debts accumulated after it ordered seven aircraft worth 136 million US dollars (about 220bn/-) from the France-based French-Italian aircraft manufacturer Avions de transport regional (ATR) in 2007.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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