Cape Town - South African Airways said tougher competition, rising finance costs and a weakening of the rand led to the state-owned carrier’s biggest loss in more than a decade.
The loss of R4.7 billion ($331 million) in the year through March 2015 was also exacerbated by the outbreak of the Ebola virus in West Africa, which hurt traffic between South Africa and destinations in the Americas, India and Asia, Johannesburg-based SAA said in a statement on Thursday. Finance costs rose 86 percent to R490 million due to increasing dependency on state guarantees to stay solvent, the airline said.
“The increase in finance costs is directly attributable to the increased reliance on shareholder-guaranteed funding,” SAA said. “It is anticipated this will continue to increase until the airline achieves a turnaround in its operating result.”
South African Finance Minister Pravin Gordhan signed off on a further R4.7 billion going-concern guarantee last week after the cabinet approved a new board for the struggling airline. Chairwoman Dudu Myeni’s role at the company had been a source of conflict between Gordhan and President Jacob Zuma, and while Myeni remains in the post she and the new directors are expected to set a timeline for a return to profitability, the finance minister said on Tuesday.
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The loss is the highest since the R6 billion reported in 2003, according to data compiled by Bloomberg. The loss probably narrowed to R1.8 billion in fiscal 2016, according to Gordhan. Revenue fell to R30.1 billion in 2015 from R30.3 billion the previous year.
Rand weakness
A 13 percent weakening of the rand against the dollar over the reporting period - which hurt the value of ticket sales internationally when translated back into the South African currency - cost SAA R800 million, the airline said. The company has also faced competition on international routes from Middle East carriers Etihad Airways and Emirates, and domestically from low-cost airlines. The rand has weakened a further 18 percent in the 12 months through March 2016.
SAA paid directors a combined R3.18 million for the year, down from R4.48 million in 2014. That included R846 000 for chairwoman Myeni.
BLOOMBERG