SAA admits it is “technically insolvent”

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By admin February 10, 2015 22:23

SAA admits it is “technically insolvent”

South African Airways (SAA) has confirmed it is “technically insolvent” and is only surviving thanks to the R14.3 billion ($1.2 billion) of government guarantees.
“SAA has been reliant on guarantees from its shareholder [the South African government] for several years and the delay in the release of the financial statements for the 2013/14 financial year is directly related to the continued weakness of the company’s balance sheet and due to the company being technically insolvent,” SAA said in a statement.

On January 30, SAA finally released its results for the 2013/14 financial year. For the 12 months to March 2014, group revenues rose by 12% to R30.3 billion, while its EBITDA loss narrowed 12% to R374 million. Contributions from domestic and regional operations grew by 10% and 17%, respectively. Budget subsidiary Mango also reported record profits. SAA losses widened on its long-haul routes, however,  from R1.3 billion to R1.6 billion.

SAA has reduced its cost per available seat kilometre (CASK) by 5 percent from 7.05 US cents to 6.19 US cents during the period in review.

SAA was forced to declare impairments relating to aircraft. Seven widebody aircraft owned by SAA had to be revalued in terms of International Financial Reporting Standards (IFRS) to take into account their anticipated remaining useful life, which resulted in an impairment of R782 million, as well as an additional R192 million write down on related spares and inventory. Further impairments were recognised relating to the delivery of four new A320 aircraft. “These form part of a legacy agreement for 20 aircraft, dating from 2002, which was renegotiated in 2009. However, the contract provides for annual escalations which resulted in the purchase price exceeding the market value at date of delivery—thus leading to a further impairment of R369 million. Unfortunately, similar impairments are expected on future deliveries on this contract. SAA’s remaining capital commitment for these purchases is R822 million,” the airline said.

admin
By admin February 10, 2015 22:23