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Addu International Airport seeks shareholder assistance amid debt woes

Gan International Airport. (File Photo/Sun/Fayaz Moosa)

The quarterly business review of state enterprises conducted by Privatization and Corporatization Board (PCB) for Q2 shows Addu International Airport Private Limited (AIA) is seeking assistance from shareholders as it grapples with heavy debt.

The review reveals AIA saw a steep decline in its revenue in Q2 2019 compared to Q2 2018.

The greatest portion of revenue generated by AIA comes through sale of jet fuel, which declined significantly over the quarters.

AIA had generated MVR 8,542,096 million from sale of jet fuel in Q2 2019, but generated MVR 6,946,236 million from jet fuel sales in Q2 2019 – which is an 18.68 percent drop.

Current liabilities of AIA increased by 58 percent in Q2 2019 - mainly due to short term borrowings – which increased by a significant MVR 130 million.

Meanwhile, the retained losses over the quarters caused negative equity in Q2 2019. The accumulated losses by end of Q2 2019 stood at MVR 329.3 million – MVR 89.6 million more than Q2 2018.

PCB has recommended that AIA implement strategies to overcome the current situation, and has found that the company is neither in the position to pay its debts nor finance further debts, and currently depended on shareholder assistance for its operations.

The PCB made the following recommendations to improve AIA’s current situation:

Implement strategies for revenue improvement/diversify: Revenue should be improved each quarter for sustainable development of the company. The revenue generated from jet fuel is the greatest source of revenue for AIA and this revenue could be improved by increasing the number of jets flying into the airport, by increasing the bed capacity in the region, through this, other revenue including landing fees, parking, ground handling charges etc. can be improved.

Implement ways to improve cash flow: This includes proper forecasting of cash flows. Receivable collection will also improve cash flow as such, AIA should improve their receivable collection mechanisms to improve cash flows of the company. AIA should formulate a proper procedure and take necessary actions to improve cash flow position of the company.

Reduce Costs/efficiency: Costs should be minimized from all areas wherever possible. Without further developments to business, the operating expenses should not be increased. AIA can cut down staff expenses by reducing number of staffs and find ways to improve productivity. Also, expenses like repair and maintenance, telephone expenses, etc. can be minimized through better utilization to enhance profit levels.

Revise the existing unfavorable agreements: AIA should make the agreements with business partners favorable in such a way that it is more profitable for the company. AIA should make commercially sensible agreements with those and revise the existing agreements in favor of the company.

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