South African Airways has recorded a R1.8bn (€127.7m) loss in the fourth quarter of the 2017/2018 financial year – R1.2bn (€81.3m) more than was originally predicted.
This is according to its fourth quarter review released yesterday (May 16) by South Africa’s National Treasury. The presentation of the findings was due to be given by SAA CEO, Vuyani Jarana, but was cancelled after conflict over the privacy of the report. Aside from the latest financial figures, the report also contains details of SAA’s competitive business strategies which, if released, could jeopardise the airline’s success in a highly competitive industry.
Acting Committee Chairperson, Thandi Tobias, cancelled the meeting to allow for consultation over the correct procedures for dealing with sensitive business-related information.
Following the cancellation, Treasury took the decision to release the presentation that should have been given at the meeting after considering the potential impact on SAA’s strategic planning versus the need to remain within regulations set out by government. In a statement on the matter, National Treasury added: “Holding some of the reviews in committee will allow Members of Parliament to have an in-depth engagement with SAA’s leadership whilst protecting SAA’s commercial strategies.”
As Tourism Update reported in April, SAA recorded an overall loss of R5.67bn (€388.7m) for the 2017 financial year. This makes it the seventh consecutive year of reported losses and the worst since 2015. According to the presentation meant to be delivered yesterday, revenue was 12% lower than predicted while expenditure surpassed the budget by R400m (€27.1m). Sales on international routes declined 11%. SAA says the decline could be due to increased competition as well as increased negative sentiment towards the airline.
Overall, SAA says lower passenger numbers than forecast in the budget, the strengthening of the rand against the dollar and other currency movements, all contributed to the loss. Other potential causes were lower fares due to strengthening competition and higher operating costs due to fluctuating fuel and maintenance costs. The airline has forecast that it will break even in 2021.
The report further clarified the role of the oversight forum established to address liquidity and capital requirements for the airline. The forum is a joint operation between SAA and National Treasury. It has been meeting every two weeks since March and will continue to do so until September. It hopes to determine the best mechanisms to implement the most successful capital structure and funding model for the airline.
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