Aviation giant Medview Airlines Nigeria Plc has reported a 6.30 percent drop in third-quarter net profit as the company’s operating costs spiked on the back of maintenance costs incurred on newly acquired aircrafts.
For the first nine months through September 2017, the company’s net income fell to N1.19 billion from N1.27 billion the previous year.
Sales surged by 48 percent to N28.77 billion in the period under review from N19.44 billion as at September 2016.
A breakdown of sales figure shows revenue from Hajj operations, Domestic Operations, and International operations increased by 47.01 percent, 28.67 percent, 50.65 percent, to N8.13 billion, N3.68 billion and 3.48 billion respectively.
While Medview’s sales increased in the period under review, the aviation giant incurred huge operating costs as the company spent money to maintain assets it acquired in order to increase the share of the market.
Operating cost increased by 45.81 percent to N24.22 billion in the period under review while Aircraft maintenance surged by 1671.18 percent to N1.73 billion.
The company spent N4.45 billion on aviation fuel-ATK, which represents a 46.38 percent increase from last year’s N3.04 billion.
“Medview did not have as much aircraft last year as it has this year. Because the airline launched new destinations, the aircraft will have to fly longer hours than they flew before,” said John Ojikutu, member of aviation industry think tank group, Aviation Round Table (ART) and Chief Executive of Centurion Securities.
“Medview did not have as much aircraft last year as it has this year. Because the airline launched new destinations, the aircraft will have to fly longer hours than they flew before. Maintenance will increase the number of hours an aircraft flies and the number of aircraft an airline acquires,” said Ojikutu.
Analysts say the cost of maintenance wouldn’t have ballooned if aircrafts are maintained in the country as firms pay in foreign currency to buy aircraft parts.
The cost of aircraft maintenance would have reduced by at least 30 percent if Nigeria has maintenance facility in the country, but the crash of the naira has upped the cost of maintenance said the head of flight operations, Air Peace, Captain Victor Egonu.
BusinessDay’s checks show that Medview opened five new routes on the West Coast: Abidjan, Conakry and Dakar.
With the three new cities, the airline now has six destinations on the West Coast as Accra, Monrovia and Freetown are already on its network.
Despite increased operating costs, Medview’s gross margins increased to 15.78 percent in September 2017 from 14.55 percent as at September 2016. Gross profits surged 60.82 percent to N4.54 billion.
Experts commend the management of Medview on their decision to go public and have the company listed on the Nigerian Stock Exchange (NSE). This is because going public boost corporate governance underpins transparency and accountability.
When BusinessDay contacted Medview for comments on its rising operating expenses, the company said it cannot comment on the matter.
Medview’s shares closed at N1.52 as of Tuesday – 2:00 pm while market capitalization stood at N14.18 billion.
Ifeoma Okeke
