SAA incurs losses with oil price drop

SAA plane. ( <a href="http://www.shutterstock.com">Shutterstock</a>)
SAA plane. ( <a href="http://www.shutterstock.com">Shutterstock</a>)

Johannesburg - SAA was incurring losses due to the massive drop in global oil prices, according to Thursday's Business Report.

SAA was experiencing losses from the hedges it had taken on oil, the publication reported.

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 over R8bn 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 SA Post Office, and power utility Eskom.

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