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SAA finances 'returning to normality'

Aug 29 2012 10:34 Sapa

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Cape Town - Embattled SA Airways is finally beginning to see an improvement in its finances, CEO Siza Mzimela said on Tuesday.

“I don't think we are out of the woods,” she told Parliament's portfolio committee on public enterprises, six months after SAA reportedly asked government for a R6bn handout.

“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 recorded an increase in revenue of 18% year on year since then.

“So, we are beginning to see a return to normality, but that does not mean things are not still difficult.”

Reinforcing the message, SAA's group treasurer and head of corporate finance Phetolo Ramosebudi told MPs the airline was R250m up in its hedging operations this year.

In 2004, a hedging loss of R6bn wiped out the company's capital base, and in 2008, soaring oil prices led to a R1bn hedging loss.

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

SAA's fuel bill increased by R2.2bn 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 consulting firm Oliver Wyman.

Mzimela confirmed that SAA had so far spent $96m (about R807m) replacing its ageing aircraft with Airbus aircraft, but said this was a fraction of the full price tag to renew the fleet.

Ramosebudi said the company was looking at various options to finance the acquisition of 20 A320 and 321 aircraft, with the last to be delivered by late 2017.

These included transferring the acquisition price obligations to a financier, or re-financing the pre-delivery payments so far made by SAA.

In this regard, the company had spoken to the three major European export credit agencies.

Mzimela confirmed that SAA had growth plans for its Dar Es Salaam, Lusaka, Harare and Accra routes - in line with directions from Public Enterprises Minister Malusi Gigaba for the airline to prioritise African routes.

It was part of a call by the minister for SAA to reconceptualise its operations in the wake of the reports in February that the company wanted billions for recapitalisation.


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