SAA balance sheet not good, MPs told

Parliament - South African Airways' balance sheet is not looking good, but the national carrier's pilots are among the best in the world, MPs heard on Tuesday.

"Currently, our balance sheet does not look good at all. We are in the process of restructuring (it)," SAA audit committee manager Zakhele Sithole told parliament's public enterprises portfolio committee.

Alluding to a R6bn cash injection the airline is seeking for operational costs, growth and renewal of its aircraft fleet, he said the restructuring was necessary to deal with out-payments of capital.

An example was monthly payments for new aircraft.

"(Payments) were coming out of our working capital. It doesn't make sense to take the working capital and finance a long-term asset," Sithole said.

He did not provide any figures.

It is understood National Treasury and the department of public enterprises are looking into the "proper capitalisation" the airline is seeking.

Earlier this month, SAA CEO Siza Mzimela said the capital was needed for, among other things, the purchase of new aircraft.

On Tuesday, she told committee members that the global airline industry, including local carriers, was facing "very tough times" and was under great pressure.

"There has been a huge increase in fuel costs," she said.

Airport user fees, a drop in passenger demand and rising service costs, such as catering, were also adding to the pressure.

Mzimela said there was a further "double whammy" for African airlines.

"The majority of our revenue is actually generated in weaker currencies, while a significant portion of our costs are billed in US dollars and euros."

There was also a premium on fuel prices in African countries, and in some cases restrictive access to highly regulated markets.

Last year, SAA incurred a "dramatically larger" R1.3bn fuel bill, and the latest year-on year figure for the past 12 months was about R2.4bn.

On global commercial airline profitability, Mzimela said forecasts showed this was set to fall further.

"The future doesn't look any brighter," she said.

The airline's first female CEO said she was aiming "to achieve cost reductions and cost compression of over R1bn in 2012/13".

Significant investment was needed in more fuel-efficient aircraft "in order to stay sustainable as a business".

SAA would focus on increasing its yield and passenger volumes, and increasingly look to growing its cargo business.

Mzimela said SAA planned to replace its entire fleet of short-haul Boeing 737-800s by 2017.

Two Airbus A320s were delivered earlier this year, and delivery of 20 of the fuel-efficient aircraft would take place in the next five years.

On long-haul aircraft, she said the replacement programme had started, with six A330-200s delivered between February and December last year.

According to a document tabled at the briefing, SAA expects "to finalise a major aircraft order by year end to replace current non-efficient long-haul aircraft".

Mzimela said new strategies in place at SAA were starting to show results.

There had been a "solid" yield improvement of 17%, and passenger revenue was up 20% in the last quarter.

SAA chairperson Cheryl Carolus told the committee that although SAA recruited its pilots from all over the world, they were very well trained.

"You can get on an SAA flight, whether it's in London or Nairobi, and know you are safe. We don't take any chances. If we can't fly safely, we don't fly," she said.

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