Banele Ginindza
ACTING SAA chief executive Nico Bezuidenhout said yesterday that he was confident it would be profitable in three years, barring radical factors, such as Greece’s default and possible exit from the euro zone.
Bezuidenhout said he was confident that the airline would not seek more state guarantees for liquidity and solvency shortfalls.
He said SAA was turning its luck around with a 14 percent reduction in operating costs, 7 percent lower unit costs and was operating at 10 percent below budget.
At a media roundtable yesterday, Bezuidenhout laid out prospects for SAA, which included improvement opportunities that could save the airline R2.5 billion in annualised earnings over the next three years and a cost-cutting programme to save R2bn from labour costs through to supply chain re-engineering.
For April and May, operating revenues improved by 40 percent year on year, group profit improved by 23 percent, net profit improved by 16 percent and passenger volumes increased by 16 percent.
All this was achieved while overall African passenger volumes fell by 3 percent.
“Market share is going up for the business, be under no illusion. We are not out of the woods as yet, there is still substantial work to be done but… this is not a one-day game. Its not a situation where you would expect bottom line profitability to go up in the next 12 months. There is an upward trend and we see profitability improvement at every line of measurement in the current year,” Bezuidenhout said.
He warned that the group’s results for the year to March, which would be out soon, reflected a nine-month void as the turnaround programme only began in the last three months of the financial year.
He said domestic demand remained weak with a 7 percent growth in available capacity against an overall growth in the market of 2 percent, indicating an oversupply of about 5 percent.
“In an industry dominated by volatility there is one certainty and that is the next crisis is around the corner certainly,” he said.
Currency challenges
Bezuidenhout said SAA was cognisant of the weakening of the rand.
“SAA, as with most South African carriers, has approximately 60 percent of its costs denominated in hard currency, so even if we did nothing, never increased a single item of our cost bill, it would increase based on weakening of the rand, so its for that reason that we’re doing this head count reduction while we are negotiating supply agreements, why we are relooking at our fleet, renegotiating our fleet,” he said.
“Changing of the fleet is afoot and that does help us address the escalating fuel costs the revenue initiatives, they start speaking to route expansion, but its a bit premature to mention those routes right now,” he said.
SAA was consolidating its debt profile, which consisted of an array of shorter-term finance facilities. He said the airline was going to consolidate debt and shorten the currency exposure of its profile.