News Column

SAA loss narrows after R1bn cost cuts

January 30, 2014

Total income at cash-strapped airline SAA increased 14 percent in 2012/13, chief financial officer Wolf Meyer said yesterday. "Cost savings are in excess of R1 billion," he told reporters in Kempton Park . "SAA has a very weak balance sheet… We do, however, have the R5bn guarantee from shareholders." The government owns the national carrier. He said SAA suffered a loss of R900 million but the government guarantee put SAA in a position to operate. The airline reported a loss of R1.25bn in 2012. Total revenue rose to R27.1bn in the year under review from R23.9bn in the previous financial year. This was due to increases in airfares, passenger revenue and capacity. Airfares increased by 7 percent, which was partially driven by the weakening of the rand. "The rand weakened… and had a negative influence on our operating expenses. "In real terms costs are down by 2 percent from the previous financial year," Meyer said. Operating costs were up by 12 percent to R27.5bn. Earnings before interest, tax, depreciation and amortisation improved from a loss of R705m in 2011/12 to a loss of R425m in 2012/13. Public Enterprises Minister Malusi Gigaba said no bonuses were paid to executives. He said it was important to stabilise the airline's finances and they knew it would take time. On September 10 last year, Gigaba unveiled a 12-year turnaround strategy for SAA to consolidate its routes and update its fleet. The strategy was aimed at bringing the national carrier back to a point where it could leverage off its balance sheet. In May last year, Business Day reported that SAA postponed its bond issue in favour of borrowing R1.5bn from two banks. The loans were working capital to keep operations running while SAA grappled with high fuel prices and its loss-making long-haul business in a highly competitive market. SAA used a R5bn state guarantee extended to it last year to secure the loans. In January last year, SAA received a R550m bank "facility" to cover fuel and other short-term commitments. In 2012, the airline said its losses over the past decade amounted to R14.7bn. The Mercury

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Source: Mercury, The (South Africa)

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