SAA revenue jumps 12 percent

An SAA plane at OR Tambo in Kepmton Park Gauteng. Photo: Leon Nicholas

An SAA plane at OR Tambo in Kepmton Park Gauteng. Photo: Leon Nicholas

Published Jan 30, 2015

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Johannesburg - SA Airways group revenue grew 12 percent to reach R30.3 billion, according to its financial results for the year 2013/2014 released on Friday.

“During the period in review, the SAA Group has realised growth in revenues by 12 percent (from R27,1 billion to R30,3 billion) with an operating loss (EBITDA) of R374 million reported (R425 million FY 2012/13),” SAA said in a statement.

EBITDA stands for “Earnings Before Interest, Taxes, Depreciation and Amortization”.

Cost containment during the reporting period yielded sustainable savings of R453 million.

“The SAA Group's domestic operations remain profitable with 10 percent growth in its profit contribution from R722 million to R791 million.”

African routes grew 17 percent, from R648 million to R761 million.

“SAA's long-haul intercontinental operations recorded an increased loss from R1.3 billion in the previous financial year (2012/13) to R1.6 billion in losses reported for the 2013/2014 financial year.”

However re-configurated routes to Beijing and Mumbai were expected significantly improve performance.

The weakened rand and high fuel prices had affected the financials for period review. Also, revaluation of seven wide-body aircraft owned by SAA resulted in an impairment of R782 million - as well as an extra R192 million write down on related spares and inventory.

There were further impairments relating to the delivery of four new A320 aircraft, part of a 2002 legacy agreement, renegotiated in 2009, for 20 planes.

“However, the contract provides for annual escalations which resulted in the purchase price exceeding the market value at date of delivery Ä thus leading to a further impairment of R369 million.

Future deliveries on the contract were expected to lead to further impairments, the airline group said.

“SAA's remaining capital commitment for these purchases is R822 million.”

SAA was one of three state owned companies transferred to the Treasury from the department of public enterprises on December 12

last year after Minister in the Presidency Jeff Radebe said Cabinet was concerned about their performance.

Last week the finance ministry announced that Minister Nhlanhla Nene had approved an additional R6.488 billion guarantee for SAA, taking the total guarantees granted to the airline to R14.3bn, subject to certain provisos.

The release of SAA's financial statements for the 2013/14

financial year had been delayed because it was technically insolvent. The guarantee allows SAA to borrow more money.

“It is the intent of the Board (reconstituted in October 2014) and SAA management to reduce the reliance on guarantees and return the business to relative stability,” SAA said.

Nene said in a speech prepared for delivery after SAA's annual general meeting on Friday that state-owned companies would not simply be granted hand-outs.

“Let me reiterate, over the medium term, any funding of state-owned companies will be contingent on the implementation of sound restructuring plans with strong government oversight.

“Given fiscal constraints over the next two years, re-capitalisation will not be drawn from tax revenue or added to the debt of national government.”

The 90-day action plan, which ends March 24, for the airline's recovery would take time to fully reflect on the company's financials, Nene said.

“Importantly, SAA must be self-sustaining as no recapitalisation will be forthcoming from the shareholder and SAA will therefore be required to generate the required profits to return the airline to financial sustainability.”

Sapa

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