Cape Town – A heavy reliance on foreign-denominated currencies and a failure to meet its occupancy targets were blamed for South African Airways' (SAA's) poor results in the 2015/16 financial year.
Acting CEO Musa Zwane told Parliament on Wednesday that 60% of SAA’s costs are dollar-based and 40% are rand-based. “There is a 20% gap, which requires good hedging strategies, which we are not so good at,” he said.
SAA made a R1.47bn loss in 2015/16, which followed a R5.64bn loss in 2014/15.
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Acting chief financial officer Phumeza Nhantsi told Parliament that operating costs were impacted by the weakening rand, which saw a 23% year-on-year decline.
That meant the 45% drop in the price of Brent crude oil only saw a 28% decrease in the fuel cost in 2015/16.
SAA had missed its seat budget target by 159 000 in 2015/16, which explains why the airline’s revenue only increased by 1% from R28.83bn in 2014/15 to R28.827bn in 2015/16.
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“Revenue passenger numbers are flat,” said Nhantsi.
The decline in the occupancy rates comes as its subsidiary, Mango Airlines, revealed it had a seat occupancy rate of 81% in 2015/16.
It made a net loss of R36.9m in the year ended March 2016, its most recent financial statements show.
Giving an update on the current financial state of SAA, Nhantsi said in the second quarter of 2016 earnings before interest and taxes had missed its profit target of R221m by R15m.
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She said interest rate costs totalled R288m during the period, impacted by a 14% decline in the rand/dollar exchange rate from April to June. This was 41% higher than during the same period in 2015.
“This shows the heavy reliance on government guarantees,” she said, adding that SAA received R4.7bn in guarantees during this period from Treasury.
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