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SAA projects loss of R853m

Business Report
NATIONAL airline SAA’s financial troubles are far from over after the carrier projected a loss of R853million in the 2016/17 financial year, which ended in March.

In its corporate plan for 2017/18, which was tabled in Parliament yesterday, SAA said it was implementing cost-cutting measures to recover the losses.

This is the third year running in which SAA has suffered a financial loss.

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However, the projected loss is far lower than the earlier losses, which amounted to billions of rands.

In the 2014/15 financial year, SAA suffered a loss of R5.6billion, while it incurred a loss of R1.5bn the following year.

SAA said a number of factors contributed to the losses over the past three years. These include a weak balance sheet, leadership instability, complexity of approvals and a shortage of critical skills.

SAA said in the corporate plan it has been battling to reach revenue targets.

“SAA has failed to meet its budgeted revenue for the past three years, falling short in revenue by 12percent in the financial year 2015, (by) 4percent in the financial year 2016, and a projected 9percent in the 2017 financial year,” the report said.

“Given its cost structure and service level, SAA needs to generate premium revenues above domestic and regional carriers to satisfy its cost base.”

It said it had a higher cost structure than its regional competitors.

The airline said its revenue would increase to R34bn in the future and that its aircraft lease would escalate to R2.9bn, while financial costs would peak at R1.7bn.

SAA said it has adopted measures to improve its financial position.

The airline said it was reviewing cash management processes and procedures.

SAA was “re-negotiating existing funding agreements to secure more market related cost of funding” and would also look at alternative sources of funding.

The airline would also manage salaries and other overheads.

In addition, it would implement an “industry-standard fuel conservation programme to optimise flight planning, taxing procedures, reporting and maintenance”.

SAA also said in the corporate plan there was tough competition in the industry, and it would also look at shutting down some of its unprofitable routes. However, it did not indicate which routes are likely to be cut.

SAA has been without senior officials for the past two years.

Last week, it announced that former acting chief financial officer Phumeza Nhantsi has been appointed to the position permanently.

Finance Minister Malusi Gigaba also announced that the chief executive position would be filled soon after the first round of interviews recently.

Musa Zwane has been acting CE since November 2015 after SAA and former CE Monwabisi Kalawe parted ways following a legal battle.

The matter was in the Labour Court when the two parties reached an agreement in terms of which Kalawe paid part of his contract.

Gigaba also told Parliament last week that a decision had not yet been taken on an equity partner for SAA after its merger with SA Express (SAX).

President Jacob Zuma announced in his State of the Nation Address in 2015 that the merger of SAA with SAX would strengthen the balance sheet of the airline.

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