Drop in oil price hurts SAA

2015-01-15 08:19

South African Airways was incurring losses due to the massive drop in global oil prices.

The losses were from the hedges it had taken on oil, according to today’s Business Report.

Hedging involved taking a bet on the price of a commodity to offset future fluctuations, which could result in a gain or a loss depending on the direction of the price.

“We are making hedging losses on the oil side but that is compensated for by the gains we are witnessing on the currency side,” SAA’s chief financial officer Wolf Meyer was quoted as saying.

He denied that the company had unduly exposed itself, saying that it did not take speculative positions, the daily reported.

SAA had incurred more than R8 billion in hedging losses between 2004 and 2010.

Last year Minister in the Presidency Jeff Radebe announced that the treasury would assume control of the financially constrained company.

“President [Jacob Zuma] has assigned Deputy President Cyril Ramaphosa to oversee the turnaround of [these] three state-owned companies,” Radebe said.

He said Cabinet was concerned about the performance of some state-owned companies, in particular SAA, the South African Post Office, and power utility Eskom.

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