Thursday, November 9, 2017

Air transport feels the pinch of financial crunch: TAA


By Alex Malanga @ChiefMalanga

Dar es Salaam. Passenger and cargo traffic fell in the past two years despite a 1.5 per cent increase in aircraft movements to 145,619 in 2016, Tanzania Airports Authority (TAA) data show.

According to TAA, passenger traffic decreased by 1.7 per cent in 2016, falling to 3.4 million during the same year, while the total transported cargo volume declined by 18 per cent, to 20,634.7 tonnes.

The Julius Nyerere International Airport (JNIA) in Dar es Salaam accounted for 72.7 per cent of the total passenger traffic, and 84.3 per cent of the total cargo transported in year-2016.

TAA acting director general Richard Mayongela attributes the negative performance to the government’s directive to ban foreign trips by public officials that were considered really unnecessary.

‘There is no room for wasteful trips.”

When President John Magufuli formally assumed power on November 5, 2015, he restricted foreign trips for senior officials in an effort to curb misuse of public funds that was rampant in the past.

Officials wishing to travel abroad at government expense were required to seek prior approval from the office of the president, the vice-president or the chief secretary – always fully stating the necessity and benefit(s) of the trips.

The President told Parliament that Sh356.3 billion was spent on travels abroad by officials from government ministries, departments, agencies and parastatal institutions between the years 2013/14 and 2014/15.

Mr Mayongela also said that illiquidity was partly to blame for the aviation industry’s financial and other woes.

For example, PrecisionAir corporate affairs manager Hillary Mrema laments that the current economic hardships are adversely affecting air transport as a matter of course.

“Air transport suffered in 2016. The government’s cost-cutting measures led to turbulence not only for airlines, but also for the whole of the aviation industry.”

That, he noted, was partly because the government – the main spender – reduced its transactions with the private sector. “It is inevitable for us to feel the pinch due to the government’s decision to ban foreign trips by public servants.”

In the event, he appealed to TAA to lower the current airlines operational costs by decreasing charges for industry operators.

Tanzania Air Operators Association executive secretary Laurence Paul expressed a desire to see a safety and economic policy being formulated that would enable the aviation industry to prosper.

He also called on the government to tackle the challenge of multiple charges to reduce the burden for airlines.

Business expert Donath Olomi believes that the investment environment should generally be improved in all the sectors of the Tanzanian economy so as to attract more investors. This would speed up attainment of the middle-income economy envisaged in the National Development Vision-2025.

In the event, he called upon the government to create opportunities for more Tanzanians to get involved in large projects that create new jobs and fuel money circulation.

“Our customers are mainly those in the middle-income bracket. We need to strengthen this class to foster growth of the industry,” Dr Olomi stated.

Experts advised operators to stop cut-throat competition, saying it is harming them.

To increase efficiency, airports should be improved.

In a related development, passenger air travel at the global level is projected to maintain positive growth rates up to 2030, despite the number of challenges which the industry is facing.

According to the International Air Transport Association (IATA), airlines around the world are struggling with high jet fuel prices and sluggish economic growth.

However, it is predicted that these difficult economic conditions will be offset by an increase in passenger volume numbers – which is in turn projected to translate into improved financial performance of the airline transport business.

It is believed that the global aviation industry will reach close to $30 billion in profits in 2017, up from only $8.3 billion in 2011.

Between 2016 and 2035, the number of airline passengers is projected to grow at a compound annual growth rate of almost five per cent.

Recently, IATA announced full-year global passenger traffic results for 2016, which show that demand rose by 6.3 per cent, from six (6) per cent the previous year.

This strong performance was well ahead of the ten-year average annual growth rate of 5.5 per cent.

Capacity rose 6.2 per cent (unadjusted) compared to 2015, pushing the load factor up by 0.1 percentage point to a record full-year average high of 80.5 per cent.

A particularly strong performance was reported for last December with an 8.8 per cent rise in demand outstripping 6.6 per cent capacity growth.