PRECISION AIR PASSES LATEST IOSA AUDIT
(Posted 26th August 2016)
Precision Air Services earlier today reaffirmed its progress towards recovery after it recorded a more than 50 per cent drop in operating loss from TShs 53B to TShs 25B as per the audited and published group financial statements for the year to 31 March 2016.
Group turnover for the year reduced by 16% as a result of aircraft undergoing maintenance and awaiting engine overhauls. The company was only able to fly 374, 877 Passengers compared to last year’s 451,769 as cash flow constraints impaired PW’s ability to simultaneously overhaul 13 engines and had to resort to a staged approach. This reduced the availability of serviceable aircraft on average during the past FY to only 4 aircraft for scheduled operations compared the previous year.
Despite the above constraints, the operating loss improvement by Tshs 28 billion was underpinned by company efforts in cost reduction and cost control measures and an improved ancillary revenue rise by more than 100 per cent compared to the previous year.
However, even with this improvement, the group incurred a loss before taxes of TShs 91.6 billion compared to TShs 83.8billion during the last Financial Year.
Significant factors negatively impacted the financials including the weakening of the Tanzania Shillings against major currencies which resulted in an increased forex loss of 28.7 Billion, and financing costs by 6.6billion compared to last year. Notably did the group have no new borrowing during the year.
Sauda Rajab, Precision Air CEO commented on the just released results when she said: ‘These results were achieved in an extremely tough aviation context in which airlines are confronted by unpredictable currency fluctuations, volatile fuel prices and insecurity. An industry forecast by IATA indicates that African carriers will continue to be loss making in 2016 even with the overall improvement in performance. Indeed the biggest challenges yet to come will be the authorities’ imposition of additional charges and the charging of VAT on leased aircraft‘.
Operation ‘Precise Way‘
As part of the airline’s turnaround strategy, Operation ‘Precise Way’ was created to focus on closing the profitability gap, reviewing the business model and creating a sustainable financial structure. Its slogan being ‘Positive Cashflow through increased revenues and reduced costs’ the turnaround strategy’s key mandate has therefore been to bring back reliability into operation so as to create a better product for our passengers. With this in mind; the group has managed to put back into operation 6 aircraft with the 7th one to be released into service in September bringing the total to 7. All this was made possible by using cash flow instead of borrowing.
Key bullet points of the annual results have been revealed as:
· Operating result improved in a difficult operational context.
· Operating loss reduced by 52 per cent in FY 2015/16, with overheads down by 48% from Tshs 87 billion prior year to Tshs 44 billion.
· Gross profit reduced by 37% to 19.4 billion
· Overall reduction of ASK’s by 11 million due to unavailability of aircraft led to;-
o A drop in passenger numbers by 17% and cabin load factor by 9%
o Finance costs and impact of exchange rate more than doubled
o Loss before tax increased by 12%
o PW reviewing long term options in relation to its capital structure in order to underpin the turnaround.
Said Ms. Sauda Rajab in closing as the announcement of the financial years were published: ‘Our reliable operations with an on time performance of 88% at zero minute plus continuous focus on the product offering and our customers has already started yielding positive results. We have revised our network by increasing frequencies on our popular routes and introduced new routes within the domestic market and the region. I wish to thank all our employees, passengers, shareholders, partners, travel agents and associates for supporting us through these difficult times. Mr. Michael Shirima and Kenya Airways in their capacity as major investors in Precision Air Services have expressed their satisfaction and strong support of the company’s turnaround progress, and continue to be closely involved with the process, they have affirmed their commitment to continue being major stakeholders in the company over the long term‘.
The airline has also recently completed the important IOSA re-certification audit and been given a clean bill of health vis a vis safe operations.