Precision Air posts profits, opts to fund fleet expansion

Saturday October 13 2012

Precision Air plans to buy more E-jets and ATRs. Photo/File

Precision Air plans to buy more E-jets and ATRs. Photo/File Nation Media Group

By Joint Report The EastAfrican

Precision Air shareholders have approved a board decision not to pay dividends this year and instead use the funds to modernise the airline’s fleet.

This is the second year in a row that the DSE listed firm is not paying its shareholders dividends despite posting profits of Tsh634 million ($104,458) for the year ended March, which is a net profit growth of four per cent.

“Growth is fundamental to succeeding in this business, and so we want to grow our fleet of aircrafts and expand our route network,” said Michael Shirima, chairman of Precision Air.

The company plans to spend $90 million over the next 3 years on upgrading its fleet, which should see the company launch flights to Europe, the Middle East and Asia in the next five years.

Current fleet

The airline currently operates a fleet of five 70-seater ATR 72-500s, four 48-seater ATR 42s and three Boeing 737s. The airline plans to buy more E-jets and ATRs.

Precision Air faces increasing competition from its rivals national carrier Air Tanzania, regional carriers Kenya Airways, Jetlink, Fly 540, Air Uganda and RwandAir.

“The impact of increased competition through the entry of new players into the market, accelerating fuel prices, and depreciation of the Tanzanian shilling against major currencies are among the main challenges the company is facing,” said Mr Shirima.

In a bid to secure its domestic market, the airline suspended flights on the Dar es Salaam- Johannesburg route last month, instead opting to deploy the larger Boeing 737-300 on domestic routes.

The airline has increased its capacity on the Dar- Mwanza route, while introducing five more flights on the Dar- Arusha route.

“We have decided to focus on growing both our domestic and lucrative markets. We remain excited about our growing regional footprint that includes 16 destinations while being strategically focused on consolidating our dominant domestic presence,” said Patrick Ndekana, the company’s commercial director.

More debts than assets

The aggressive expansion plan has seen the company’s debt exceed its assets by $19 million, on account of loans it took from Citibank International Plc and the Finnish Fund for Industrial Development and the IFC.

But even with the increasing challenges from new players, the airline has continued to grow its passenger numbers, albeit from a low base.

The company’s total seats flown in the network during the year ended March 2012 surged 34 per cent to 1,200,568 compared with 894,391 last year.

The available seats per kilometre (ASK) increased by 47 per cent to 729 million compared with 496 million the year before.

Board chairman Mr Shirima owns a 43 per cent stake in Precision Air, Kenya Airways owns 42 per cent, while 15 per cent of the airline’s stock is listed at the Dar es Salaam Stock Exchange.

In July, RwandAir launched the first direct flight between Kigali and Mwanza, the airline already operates flights to Dar es Salaam and Arusha.

Kenya Airways has also launched direct flights between Nairobi and Arusha, where it has a code sharing agreement with Precision.

By Joseph Mwamunyange and Peterson Thiong’o