SAA 'flying out of financial woes'

29 August 2012 - 02:10 By Sapa

SA Airways was finally beginning to see an improvement in its finances, CEO Siza Mzimela told parliament's portfolio committee on public enterprises yesterday - six months after the airline reportedly asked the government for a R6-billion handout.

"I don't think we are out of the woods. Clearly, we are still hurting, the economy is still very tight, but what we are seeing - which maybe makes us excited - is that we are beginning to see a recovery."

She said the airline had since then recorded a year-on-year increase in revenue of 18% .

"So we're beginning to see a return to normality, but that does not mean things are not still difficult," Mzimela said.

Group treasurer and head of corporate finance Phetolo Ramosebudi said the airline was R250-million to the good in its hedging operations this year.

In 2004, a hedging loss of R6-billion wiped out the company's capital base. In 2008, soaring oil prices led to a R1-billion hedging loss.

Ramosebudi said the carrier had since then reported profits on hedging, which is intended to reduce the effect of fluctuations in the fuel price on the company's balance sheet.

SAA's fuel bill increased by R2.2-billion in the past financial year.

Ramosebudi said SAA's hedging policy was cautious and constantly reviewed. At present, the company was using a model developed by international consultancy Oliver Wyman.

Mzimela confirmed that SAA had so far spent about R807-million replacing its aging planes with Airbus aircraft, but said this was a fraction of the full price tag.

Ramosebudi said the company was considering various options for financing the acquisition of 20 A320 and A321 aircraft.

The last of the new aircraft would be delivered by late 2017.

Mzimela said SAA had growth plans for its Dar-es-Salaam, Lusaka, Harare and Accra routes, in line with a directive from Public Enterprises Minister Malusi Gigaba for the airline to prioritise African routes.