South African Airways announced its 2017 financial results on March 29 for the year ending March 2017. “SAA Group’s performance for the year ending March 2017 needs to be seen in the context of the important role the airline plays in the aviation sector and the broader South African economy,” said SAA Group Corporate Affairs in the release.
The airline recorded losses of R5.67bn (€388.7m) for the financial year – a decrease of R26m in revenue growth to R30.716bn (€2.11bn). Operating costs rose by R3.36bn (€230.3m) of which R1.8bn (€123.4m) related to translation losses on foreign currency balance sheet items – 11% higher than the previous year. SAA linked the nominal revenue increase to the “difficult macro-economic conditions with fluctuating currency and Brent crude prices, and a fiercely competitive environment, which constrained revenue generation. The nominal increase in revenue year-on-year was less than anticipated. The increase compared with the previous year (FY2016), is largely a result of the local currency weakness, but does reflect an increase in airfares on all our routes”.
SAA Group CEO, Vuyani Jarana says: “One of the key reasons for the underperformance was an overt focus on cost reduction without adequately addressing operating model constraints, as well as limited commercial and business skills to drive revenue growth.” The airline was also dogged by management turbulence and increasing debt levels, as well as multiple failed attempts at restructuring the SAA Group, during the 2017 financial year.
Despite this, the national carrier did record some positives across the year:
- 34 000 jobs created and/or sustained in South Africa
- R9.2bn (€630.6m), representing approximately 0,3% contribution to the national GDP annually
- Employed 10 071 staff (SAA 5 752; Mango 713)
- Maintained its safety record
- Received numerous awards as affirmation of operational excellence
- Africa’s first commercial biofuel flight made history
- On-time performance consistently above the 87.2% target
- AMOS (application software) implemented at SAA Technical
SAA says it is confident about the future outlook, “a view which has been bolstered by the early positive signs that are beginning to emerge in the form of improved performance, especially of the domestic and regional routes”. It is forging ahead with its turnaround strategy, with the aim of turning the airline into a financially sustainable entity.
“We will continue to improve our service to our customers, says Jarana. “Our value proposition is underpinned by higher order commitment to maintain high safety standards, and improved customer experience in every customer interaction we engage in. SAA is a well-recognised and respected brand in the aviation industry. The airline has a strong brand, sound track record for passenger safety and its impressive on-time performance is amongst the best of breed in the aviation industry. Voyager, our loyalty programme, is the first frequent flyer programme in Africa that is fully fledged revenue based – accrual and redemption of Miles.”
SAA has actualised what it calls “quick wins” as part of its turnaround strategy. These include transferring four aircraft to Mango Airlines with the shift resulting in 7% increase in passengers for the Group in February this year as compared with the same month last year, route optimisation, staff costs, organisational redesign, renegotiation of terms with key suppliers, and approaching lenders to support financing requirements.
“Our ultimate aim is that SAA would be the pride of the nation as an independent, financially sustainable airline. To attain this, we are taking decisive action, and accelerating initiatives to ensure alignment and to return to profitability. We continue to strive to be innovative and ensure long-term sustainability of the group,” concludes Jarana.
SAA’s full financial results can be viewed here.
