Losses continue to pile up at SAA

[caption id="attachment_98885" align="alignright" width="300"] GOING NOWHERE SLOWLY: An SAA aircraft flies over Cape Town, one of South Africa’s prime tourist attractions. The state airline has made losses in the first five months of the current financial year[/caption]

SOUTH African Airways (SAA) continued to make losses in the first five months of the current financial year‚ chief financial officer Wolf Meyer said yesterday.

But the airline’s operational performance improved 43% year on year.

This was achieved despite an 11% revenue decline because of the significant fall in average fares across the industry triggered by the lower oil price and intense competition.

Briefing parliament’s standing committee on finance on the airline’s 90-day turnaround plan‚ Meyer said he could not discuss the financial results for the year to end-March 2015 as these would be released at the airline’s annual general meeting‚ which was scheduled for early October.

He did say‚ however‚ that 2014’s operating environment had been difficult because of increased competition‚ the effects of Ebola and xenophobia on tourism‚ a weak currency‚ legacy impairments and finance costs.

Meyer said expenditure for the year to date was 9% lower because of cost savings and the lower price of Brent oil.

But the airline did not derive the full benefit of the lower oil price due to the weak rand.

“The interest charge increased significantly due to the increased reliance on debt to meet our working capital requirements‚” Meyer said.

Finance costs are forecast to rise 76% this year to R561-million from R318-million last year.

SAA plans to save R2-billion over the next three years.

This would be achieved by negotiating new leases‚ the extension of current leases and cutting staff numbers.

The airline also plans to save on its procurement and maintenance contracts‚ and improve on the utilisation of its aircraft.

Lease costs have been cut by between 40% and 50%.

“Cost reduction remains a priority and focus for the group‚” Meyer said. -Linda Ensor, BDlive