- Government-owned carrier reports the biggest loss in 12 years
- Finance costs rose due to reliance on state guarantees
South African Airways said tougher competition, rising finance costs and a weakening of the rand led to the state-owned carrier’s biggest loss in more than a decade.
The loss of 4.7 billion rand ($331 million) in the year through March 2015 was also exacerbated by the outbreak of the Ebola virus in West Africa, which hurt traffic between South Africa and destinations in the Americas, India and Asia, Johannesburg-based SAA said in a statement on Thursday. Finance costs rose 86 percent to 490 million rand due to increasing dependency on state guarantees to stay solvent, the airline said.
“The increase in finance costs is directly attributable to the increased reliance on shareholder-guaranteed funding,” SAA said. “It is anticipated this will continue to increase until the airline achieves a turnaround in its operating result.”
South African Finance Minister Pravin Gordhan signed off on a further 4.7 billion-rand going-concern guarantee last week after the cabinet approved a new board for the struggling airline. Chairwoman Dudu Myeni’s role at the company had been a source of conflict between Gordhan and President Jacob Zuma, and while Myeni remains in the post she and the new directors are expected to set a timeline for a return to profitability, the finance minister said on Tuesday.
The loss is the highest since the 6 billion rand reported in 2003, according to data compiled by Bloomberg. The loss probably narrowed to 1.8 billion rand in fiscal 2016, according to Gordhan. Revenue fell to 30.1 billion rand in 2015 from 30.3 billion rand the previous year.
A 13 percent weakening of the rand against the dollar over the reporting period -- which hurt the value of ticket sales internationally when translated back into the South African currency -- cost SAA 800 million rand, the airline said. The company has also faced competition on international routes from Middle East carriers Etihad Airways and Emirates, and domestically from low-cost airlines. The rand has weakened a further 18 percent in the 12 months through March 2016.
SAA paid directors a combined 3.18 million rand for the year, down from 4.48 million rand in 2014. That included 846,000 rand for chairwoman Myeni.