Siyabonga Mkhwanazi
THE national carrier SAA has suffered another massive loss, after its annual report showed a loss of R2.6 billion in 2014. This is more than double the loss of R1.2bn in the previous financial year.
SAA tabled its annual report in Parliament last week where it indicated that it would continue to operate as a going concern. The carrier has been financially struggling over the last few years.
In the directors’ report SAA attributed the loss to a number of financial factors. It said the airline was faced with several challenges on its business side during the 2013/14 financial year.
The report, which will be discussed by the portfolio committee on public enterprises in the second half of the year, noted the weakening rand and high fuel costs having had an impact on their business operations.
“During the current financial year, the company recognised impairments to aircraft and aircraft inventory to the value of R1.3bn,” it said .
“These impairments primarily relate to adjustments required to their fair market values,” it said. It also pointed out that there was a substantial increase on finance costs.
Fuel costs
“After depreciation and impairments, finance costs, tax and items reflected in other comprehensive income the total comprehensive loss for the year is R2.6bn against a prior year loss of R1.2bn,” said the report.
SAA said the rise in fuel costs has had a damaging effect on its operating costs. It said fuel prices increased from 35 percent to 36 percent of its operating costs.
While there had been a 3 percent reduction in the price of Brent crude, prices of fuel increased by R1.5bn because of the weak rand. Over the past five years rand fuel cost increased by 77 percent.
The airline admitted that it has been struggling in the last few years. “Historically SAA had to operate with a weak balance sheet which, together with losses incurred during the past three years, required additional assistance from its shareholder,” it said.
In 2012, the airline was given a guarantee of R5bn by government and this was extended to a perpetual guarantee. “Subsequent to year end, this guarantee was increased by an additional R6.488bn,” it added.
The report said this guarantee would enable SAA to continue to function as a going concern. Comair recently lost its case in the North Gauteng High Court over the government’s guarantees to SAA.
The British Airways company complained that this was anti-competitive and unfair to other companies. But the High Court dismissed the application at the beginning of June.