As Air Tanzania eyes its golden old days with a leased Boeing 737-200 to operate domestic and regional routes, the biggest question is: Can this type of aircraft operate profitably amid surging fuel prices?
According to our survey, some aviation experts reveal stark reality to the contrary; the Boeing 737-200 consumes at least three tons of fuel for a single trip to Mwanza, a short hop of approximately 75 minutes.
To put things into perspective, for a return trip between the two cities (Dar-Mwanza), the leased Boeing 737-200 would be consuming six tons of fuel, not to count other operating costs such as .
The 737-200 was succeeded in 1984 by the 737-300, a much quieter, larger and more economical aircraft boasting a host of new features and improvements – and whose fuel bill was a comforting 20 percent less than its predecessor.
The airline’s biggest competitor, PrecisionAir, operates a fleet of those relatively economical 737-300 planes for its domestic and regional routes.
At the current fuel price Sh1.6 million per tonne(Sh1600 for a single litre of Jet fuel-A1), what these figures mean to ATCL is that the cash-strapped national airline would roughly spend Sh860.76 million within 90 days just by operating one domestic route of Dar-Mwanza.
In monetary values, ATCL would spend Sh4.8 million in fuels just to operate a single flight to Mwanza. If we factor in the leasing fee plus fuel cost without adding all other operational cost, the figures show that within three months, the national airline would dole out nearly Sh2 billion.
Fuel is the most crucial component in airline business, and aviation experts estimate that it could consume up to 40 percent of entire revenues – which is why most airlines have been going for fuel-efficient aircraft to curb the surging fuel costs.
In East and Southern Africa, for instance, most airlines have abandoned or replaced their 737-200 with 300, 400, 500 and 800 serie to reduce fuel costs – and make sense in business.
The 737-200 can carry at least 106 passengers and crew. Introduced in February 1965, the 737 was originally envisioned as a 60- to an 85-seater, before it was improved to accommodate 100 passengers and six crew.
Whereas the leasing fee of $1350 per block hour – with a tied guarantee of 150 block hours a month -- would cost a whopping $202,500 (Sh324 million) a month and $607,500 (Sh972, million) in three months, per diems for nine crew members would cost another 64,800 (103.68 million).
When it started its Dar-Mwanza operations on October 12, the ATCL had pegged its fares at a promotional rate of Sh199,000 so as to put feet on the ground against stiff competition in the domestic airline business.
The rate lasted for just two weeks before it expired on October 25. The new rates for the same route is now pegged at Sh255,000 beginning October 26.
Another key factor in airline business is that an average of Sh92,000 on every single round trip ticket go to service charges, airport taxes, fuel insurance and security.
For a single trip, those deductions would stand at around Sh51,000 per ticket. So a ticket charged at Sh255,000 would give ATCL a net Sh163,000 – apart from the 30 percent which goes to its appointed agents if the tickets aren’t bought at its head offices.
Based on the promotional Sh199,000/- fares charged over the past two weeks and pocketing Sh107 per ticket and on assumption that ATCL enjoyed an unlikely maximum sitting capacity of 106 passengers per trip, it could have generated at least Sh158.788 million.
With the current fare of Sh255,000 minus airport charges and taxes, ATCL would generate roughly Sh1.313 billion in the remain 76 days of the leasing agreement period – all on the assumption that it operates to full capacity during that period.
What these figures simply mean is that ATCL’s projected revenues during the 90 days of lease would generate about Sh1.471 billion. With the lease and operational costs standing at Sh1.96 billion – minus expenses on transport and hotel accommodation for nine crew members, ground handling services as well as in-flight food and drinks, staff salaries and commissions – it isn’t clear whether the troubled national airline would make any business sense.
Only time will tell.