Wednesday 22 November 2017

SAA posts surprise profit in July, after R1.4bn quarterly loss

SAA posts surprise profit in July, after R1.4bn quarterly loss
(Business Day 09/13/17)
SAA posts surprise profit in July, after R1.4bn quarterly loss

Plan to cut flights includes cutting flights in the crowded domestic market by more than a third

South African Airways (SAA) plans to significantly reduce its flights by 23% from the end of the year.

Domestic routes will be slashed by 37%, regional routes by 11% and international routes by 4%.

The initiative is part of a programme to remove loss-making routes and rationalise the airline’s network.

The flight reduction will be the outcome of the removal of narrow-body aircraft from the airline’s fleet, with one having already left and four more expected to leave by December 2017.

The last of the five excess wide-body aircraft will exit the fleet in October 2018.

These plans were revealed in a presentation by SAA executives submitted to Parliament’s standing committee on finance Wednesday.

The flight reduction is part of SAA’s plan to cut costs and limit its losses.

According to the presentation, SAA made a loss of R1.4bn in the first quarter of the current financial year.

But in an encouraging sign, the airline made a profit for the first time in a long time in July — of R19m, and compared with a budgeted loss of R207m.

Income for the month was almost in line with budget.

SAA said progress was being made in cutting costs but finance costs were high, amounting to R468m in the four months to end-July compared with R363m in the same period last year.

As well as stagnant revenue growth and increased finance costs, SAA faces intense competition from low-cost carriers.

"Engagements with the lenders on the long-term extension of the maturing debt are ongoing," SAA executives said.

"One of the lenders has indicated that they would like to engage on a payment plan."

SAA’s long-term turnaround plan involves a R13bn capital injection by the state over the next three years.

It already received a R2.2bn injection a few months ago, when it was unable to repay a loan from Standard Chartered Bank.

Finance Minister Malusi Gigaba is expected to announce an equity injection when he tables the medium-term budget policy statement in Parliament next month.

LINDA ENSOR

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