THE global lockdown caused by Covid-19 pandemic has plunged the aviation sector in the world into massive losses and it might take time to recover.
At the backdrop Tanzania purchased a fleet at time the world was trapped in a complex situation due to Covid-19 that unquestionably hit hard the global aviation sector for a good part of the 2019/20, the same period the Controller and Audit General (CAG) report was being prepared.
The Air Tanzania Company Limited (ATCL) as one of the airline company hit hard by the pandemic was mentioned in the CAG report that recorded a loss of 60bn/- during 2019/20 fiscal year.
The CAG report was handed over to President Samia Suluhu Hassan last Sunday by CAG, Charles Kichele.
“In my opinion, assessing its position and history of airline Tanzania, one thing to bear in mind is that loss making for an airline business especially for ATCL isn’t unique to ATCL only,” remarked Dr Hildebrand Shayo, who is an economist cum investment banker.
Few examples indicate that airlines in South Africa, Kenya, USA, and UK have differently experienced losses over the years.
Without going into the detail, common logics tells that airlines are not among much money-making business at all, and this would join experts with a lifetime of experience in the industry.
What is being proposed here is that airline profits are difficult to understand because of how the industry itself works and their profits margin.
In fact, in airline industry business specialists will agree with me that airlines based on history as reported in audited accounts accessible have never achieved a level of profit that could be at all considered as offering a competitive return on investment.
With teeth layer thin margins of 1-2 per cent, there is just no buffer against the certain unexpected events that occur with customer demand and changing sentiment.
To demonstrate that loss making for an airline isn’t unique for ATCL, scanning on big airline annual loss and earning indicates that this industry experiences loses and profits based on various factors.
For instance, in the 1990, there was an airline according to air transports association of America data that incurred losses and extracted for illustration purposes indicates, that airline do make loss and profit.
Specifically examined loss and earning airline referenced here made a loss of $3.9 billion loss, in 1991 a loss of $1.9 billion loss, 1992 loss of $4.8 billion loss, 1993, $2.1 billion loss, 1994, $0.3 billion loss, 1995, $2.3 billion profit, 1996, $2.8 billion profit, 1997, $5.2 billion profit, 1998, $ 4.9 billion profit, 1999, $5.4 billion profit, 2001, $ 8.3 billion loss, 2002, $11.0 billion loss, 2003, $2.4 billion loss, 2004, $7.6 billion loss and 2005, $5.7 billion loss.
What this example shows is that loss making and earning is a financial situation an airline has to be grapple with, hence 60bn/- losses shouldn’t make us to think is the end of the road.
In my opinion, to be successful in airline business few areas need attention such as the attractiveness of the airline’s service and the effectiveness of the airline’s promotional expenditures to appeal to customers.
Managing the fleet meaning the manner load factor relative to the industry average will in future indicate how well ATCL can recover from the loss made. In fact this has to go hand in hand with well managing people and finances.
So speaking now especially from an investor’s point of view and in an honest attempt to look at airline business it is too early to start blaming out ATCL for loss that was reported in the CAG report.
The airline had only been revived in the past five years and given our history and the operating environment terrorising the world, that is lockdown and effects of the covid-19, the situation might be different down along the line when the world normality start again. Central to remember is airlines provide a vital service that helps to stimulate and boost other economic activities.