Precision air records 30.4bn/- loss

Tanzania’s biggest private airline, Precision Air, has recorded a loss of Sh30.4 billion, ahead of the news indicating it is facing a financial crisis.

The Dar es Salaam Stock Exchange listed company (PAL) reported in its annual financial results for the year ending March 31, 2013 – a copy of which The Citizen has - that its loss increased to Sh30.4 billion, negating the Sh1.8 billion profit it recorded the previous year due to increase in running costs.

The company says the number of passengers over the period went up by 8.5 per cent to 895,650 against 825,150 a year before but the revenue was eaten by the increase in direct and indirect expenditures.

According to the statement, direct expenditures went up by 24 per cent to Sh145 billion due to an increase in the cost of fuel and equipment related costs.

Aircraft maintenance costs increased from Sh11.9 billion in 2011 to Sh23.6 billion in 2012 mainly due to the high cost of maintaining the Boeing 737 Fleet, remarks Precision Air in the statement.

Indirect expenditure on the other hand grew by 18.6 per to Sh42 billion, driven mainly by staff related costs that went up by 8 per cent to Sh28.5 billion against Sh26.4 billion the year before.

Financing cost grew up by 8 per cent due to overdrafts, whereas the company accrued a loss in foreign currency exchange of Sh4.4 billion which is a 50 per cent increase over the previous year’s.

The company also says loss on impairment of receivables grow to Sh8.6 billion from Sh0.3 billion the previous year due to additional provisions made in relation to other carriers billing rejections that were unprocessed by year end.

“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,” says the statement issued by Michael Shirima, the chairman, and Sauda Rajab, group managing director & CEO. 

Much as Boeing 737 aircraft leases, staff retrenchment and internal efficiencies, and revenue enhancement opportunities which include third-party maintenance and third party advertising.

Precision Air was reported to be in a financial turmoil and desperately in need of a $32 million (about Sh51.2 billion) bailout package to enable it to meet urgent cash obligations that include servicing bank loans and paying aircraft suppliers.

Mr Shirima said the airline was going through tough times because of huge debts accumulated after it ordered seven aircraft worth $136 million (Sh218 billion at current exchange rates) from the France-based French-Italian aircraft manufacturer Avions de transport regional (ATR) in 2007.

The debt ballooned because the anticipated cash flow after the company listed on the Dar es Salaam Stock Exchange in 2011 did not materialise.
Source: The Citizen,reported by Alawi Masere, from Dar es Salaam, Tanzania
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