Precision Air, Tanzania’s only publicly listed airline company, yesterday held their second Annual General Meeting since the company had floated their IPO and was listed on the Dar es Salaam Stock Exchange.
Following a tumultuous year after Chief Executive Ms. Sauda Rajab had taken over the company and found it literally in financial dive mode, have cost cutting measures across the board, led by a return of the loss making B737 fleet to the lessors, turned the ship around however.
Miss Sauda Rajab, in her report to the shareholders, was cautiously optimistic that the present, yet unaudited, results of the first half of the current financial year from April to September would be maintained, allowing the company to once again write a profit into the books, news which must have been music in the ears of the shareholders who found the optimistic forecasts of the former CEO turn into a financial nightmare with a loss of 30 billion Tanzania Shillings.
Under the new management was a realistic 5 year strategic plan drawn up, which is paying much emphasis on the use of the company’s ATR fleet on domestic and near regional operations, and early results suggest that this is the way to go and leave more distant routes, for the time being at least, to partner airline Kenya Airways which offers 65 destinations across Africa and into the wider world via Nairobi. Chairman Michael Shirima did however keep the door to jet operations open when the company had financially stabilized enough to introduce larger aircraft again on domestic and regional routes. Said Shirima to the shareholders in his address: ‘Precision Air PLC 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, Precision Air recorded a loss of Tshs 30 billion for the year ending March 31st 2013. Prior to this loss, the company had posted an average of a net profit margin of 4 per cent for the preceding seven years from 2006. From moving 340,000 passengers in 2006 to 896,000 passengers in 2013 is not a small achievement. Indeed moving a total of close to 5 million passengers over this period is an enviable feat. Unfortunately, growth in the number of passengers did not translate into profitability growth for reasons some of which are pointed out below. The reported loss in 2013 brings down the average net profit margin for the past 8 years to just one (1) per cent. After [a] thorough performance review for the past few years, the Board has noted [the] key possible sources of trouble. These are: inefficient network, costly fleet type, low productivity, lack of cost control and un-optimized ancillary revenue opportunities.
As a result, the Board has appointed Deloitte & Touche to dig further into the performance of the company, and we awaiting their report which will determine way forward. Furthermore, the Board made significant change in management and is optimistic that these problems presents an opportunity to drive back the company to profitability for the days ahead. Other measures are aimed at business consolidation and re-thinking of business model given the external competitive environment. More importantly value enhancement will involve optimal deployment of existing assets to increase cash flow, improving operational efficiency, and reduce cost of financing. Cost control measures will not compromise fleet safety’.