SAA CEO discusses the airline’s huge operating loss and how Treasury will assist

(Click here to read "4 steps Government is taking to save SAA")

SAA’s latest results, released on Friday, show continued losses on international routes and R200-million damage from fuel hedging after the unexpected drop in oil prices.

The airline reported a R374-million operating loss for the year ending March 2014, down from R425-million for the year ending March 2013.

Why cheap oil isn’t helping

“While the oil price has come down, the rand has weakened substantially," explains acting SAA CEO Nico Bezuidenhout.

About a decade ago SAA lost billions in an attempt to hedge itself against oil price movements. It still buys protection against rising oil prices; and is still losing a lot of money doing so.

“We can hedge up to 60 percent of volumes 18 months out,” says Bezuidenhout. “We’re currently hedging about 40 percent, so we won’t see the full effect of cheaper oil in ticket prices.”

SAA needs newer, more fuel efficient airplanes

Fuel contributes about 37 percent of all SAA’s costs while the global average is closer to 27 percent.

“Treasury wants to know what our network is going to look like before they’re willing to provide more money for newer planes,” says Bezuidenhout. “It’s a stance that makes sense, which is why we’re firming it up by cutting lossmaking routes.”

Listen to the complete interview for more detail:

How Treasury will assist SAA

Finance Minister Nhlanhla Nene recently said that recapitalisation is not on the cards for South African Airways (SAA).

The national air carrier is currently in its 90 day turnaround action plan, part of a long-term mission to make SAA profitable again.

Minister Nene said that that government would consider selling property; direct and indirect shareholdings in listed firms and non-strategic government holdings in state companies to raise funding for state-owned firms which qualify for governement assistance.

Listen to CapeTalk’s Kieno Kammies interview Bezuidenhout about how National Treasury is assisting SAA:

(Click here to read "4 steps Government is taking to save SAA")

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