Trou­bled SAA has burnt through bil­lions

CityPress - - News - SU­SAN COM­RIE, DE­WALD VAN RENS­BURG and TINA WEAV­IND news@city­press.co.za

Fi­nan­cial state­ments that SAA was hop­ing to keep se­cret un­til early next year show just how dire the sit­u­a­tion at the trou­bled na­tional car­rier was ear­lier this year.

SAA’s fi­nan­cial state­ments for the year end­ing March 31 2015 are only ex­pected to be re­leased in Jan­uary, but an ex­tract of the fi­nan­cials given to City Press on Fri­day ap­pears to show that the com­pany’s losses for the year reached a stag­ger­ing R4.7 bil­lion.

This is al­most dou­ble the pre­vi­ous year’s losses of R2.5 bil­lion.

Ex­tracts from the long-de­layed fi­nan­cial state­ments show that while rev­enue flat­lined in 2014/15, costs rose by R956 mil­lion to R31.6 bil­lion.

On Fri­day, SAA spokesper­son Tlali Tlali told City Press: “SAA has not re­leased its an­nual fi­nan­cial state­ments. Th­ese will be re­leased dur­ing the an­nual gen­eral meet­ing at the date de­ter­mined by the share­holder. Your in­for­ma­tion en­joys no of­fi­cial sta­tus.”

Among the big­gest cul­prits for this in­crease were main­te­nance costs, which in­creased by R819 mil­lion to R3.4 bil­lion, em­ploy­eeben­e­fit ex­penses (a R430 mil­lion in­crease), and leas­ing costs (a R292 mil­lion in­crease).

Had it not been for cost sav­ings of R891 mil­lion on fuel and en­ergy costs – thanks in part to a drop in oil prices and the max­imis­ing of un­prof­itable routes – the fi­nan­cial sit­u­a­tion would have looked even worse.

The ma­jor dam­age, how­ever, comes from SAA’s ris­ing im­pair­ments, which jumped from R1.4 bil­lion to R1.9 bil­lion in the year.

Although the ex­tracts of the fi­nan­cial doc­u­ments in City Press’ pos­ses­sion are in­com­plete, the pre­vi­ous year’s im­pair­ment of R1.4 bil­lion re­lated to SAA’s ac­qui­si­tion of six costly Air­bus A320s, which were as­sets that re­sulted in SAA hav­ing to de­clare a loss on its books as soon as the planes were de­liv­ered.

At the same time, SAA was re­tir­ing its old re­dun­dant fleet, fur­ther adding to the im­pair­ment.

SAA took de­liv­ery of an­other four of these Air­bus air­craft in the 2014/15 fi­nan­cial year, which most likely con­trib­uted to the mas­sive im­pair­ments.

In Novem­ber last year, SAA im­ple­mented a dras­tic 90-day turn­around plan un­der the lead­er­ship of then act­ing CEO Nico Bezuiden­hout.

Due to SAA’s strat­egy of re­leas­ing its fi­nan­cial re­sults al­most a full year late, there was lit­tle pub­lic in­for­ma­tion de­scrib­ing just how bad the fi­nan­cial sit­u­a­tion had be­come.

How­ever, in April, Bezuiden­hout re­vealed that the turn­around strat­egy had made ma­jor im­prove­ments to the air­line’s fi­nan­cial po­si­tion, re­sult­ing in cost sav­ings of R1.25 bil­lion.

This in­cluded sav­ings of R262 mil­lion thanks to rene­go­ti­ated lease agree­ments, and sav­ings of R440 mil­lion through net­work changes.

Bezuiden­hout stood down as act­ing CEO in July and re­turned to his po­si­tion as CEO of bud­get air­line Mango.

Lit­tle more than a week ago, SAA and Trea­sury gave an up­date on the air­line’s trou­bles in Par­lia­ment.

The loss for the six months from April 1 to Septem­ber 30 added up to R656 mil­lion, it was re­vealed.

This rep­re­sents a ma­jor im­prove­ment when com­pared with the an­nual fi­nan­cial state­ments in City Press’ pos­ses­sion, which showed the R4.7 bil­lion loss for the pre­vi­ous fi­nan­cial year.

The 2009 Air­bus ac­qui­si­tion deal, which has con­trib­uted to SAA’s mas­sive im­pair­ments, has also been at the cen­tre of the air­line’s on­go­ing fall­out with Trea­sury af­ter chair­per­son Dudu Myeni al­legedly tried to change the terms of the deal ap­proved by Fi­nance Min­is­ter Nh­lanhla Nene.

Trea­sury’s deal al­lowed SAA to can­cel the pur­chase of the next 10 Air­bus A320s, and re­place them with a more cost-ef­fec­tive leas­ing op­tion, po­ten­tially sav­ing the air­line R1.6 bil­lion. Myeni’s de­ci­sion to push for a new deal has the po­ten­tial to dra­mat­i­cally worsen SAA’s fi­nan­cial sit­u­a­tion.

In the early hours of Tues­day morn­ing, SAA in­ter­dicted City Press, Busi­ness Day and Money­web af­ter the pub­li­ca­tions re­ported on the con­tents of an in­ter­nal memo writ­ten ear­lier this month to the SAA board by for­mer act­ing CEO Thuli Mp­she re­lat­ing to Myeni’s Air­bus-deal de­ci­sion.

The memo, which was pre­pared by the head of le­gal, risk and com­pli­ance at SAA, Ur­sula Fikelepi, con­tained “priv­i­leged” and “highly con­fi­den­tial” in­for­ma­tion of a “very sen­si­tive na­ture”, ac­cord­ing to SAA.

The in­for­ma­tion could have “the po­ten­tial of caus­ing real and se­ri­ous rep­u­ta­tional and fi­nan­cial dam­age to [SAA] and the gov­ern­ment”, added Fikelepi in an af­fi­davit.

City Press and the other pub­li­ca­tions will be con­test­ing the fi­nal­i­sa­tion of the or­der in court this week.

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