South African Airways (SAA) has released its 2012/13 Annual Financial statements showing a cost savings in excess of R1-billion and a 14% increase in total income. The financial results were released recently following the airlines annual meeting held at its Kempton Park headquarters.

The airline reported total revenue of R27,1-billion in the year under review against the previous financial year s R23,9-billion.”The increase in revenue is attributed to various factors including 7% increase in airfares despite competition from the Middle East region continuing to place pressure on average airfares; 8% increase in revenue passengers with domestic routes traditionally contributing positively to the airlines performance ,and 3% increase in available capacity.

“New destinations and frequencies launched during 2011 are now maturing and making positive contribution to the airlines improving revenue. Additional routes launched in 2012 are similarly starting to yield more positive returns.”

Dealing with operating costs, the financial report continued: “Fuel cost and the weakening of the ZAR against the USD (13% year-on-year) among other factors continue to impact severely on the airlines operating costs. Despite the challenging and competitive environments, SAA delivered a 40% improvement in earnings before interest, taxes, depreciation and amortization from a loss of R 705-million in 2012 to a loss of R 425-million in 2013. After depreciation, amortization, finance costs and investment income, the airline reported a 14% improvement in the loss before tax from R1,4-billion to R1,2-billion .

“Fuel cost had the most impact on long haul routes where the existing fleet is fuel inefficient. The average fuel price was at levels in excess of US$ 110 which further eroded route profitability.”

The report added that although operating costs reflected a 12% year-on-year increase, fuel remained the single biggest cost to SAA having increased from 34% to 35% of operating cost. For the period under review, fuel cost increased by 15% to R1, 3 billion .Operating costs, excluding uncontrollable costs, decreased by 2%.

“During this period, SAA embarked on a Cost Compression Program me to re-engineer processes in order to derive sustainable cost benefits going forward .The programme consisted of 38 individual projects covering a multitude of initiatives. These initiatives ranged from basic simple projects, such as saving energy by switching off unnecessary lights, to more complex projects such as fuel-saving initiatives to optimize fuel by utilizing dynamic flight plans and alternative landing rights, and reducing the weight of on-board items.SAA successfully achieved 97% of the R1,3-billion budgeted reduction in costs, removing in excess of R1-billion in costs from the business, which was unfortunately to a large extent offset by weakening rand.”

The financial report also revealed that maintenance costs reflected an increase of 33% over the previous year from R1, 7-billion to R2, 3-billion.

“Aircraft lease costs have increased by 17% from R1,8-billion to R2,1-billion in the current financial year. The increase is largely attributable on the full year impact of aircraft entering fleet during the previous financial year. In addition, the weak rand had a significant impact on this expense item,” the report continued.

“Regulatory costs (which include navigation, landing and parking fees) increased by 18% from R1,5-billion in the previous financial year to R1,8-billion in the current year, reflecting the impact of increases in fees charged by Airports Company of South Africa and similar service providers across the global network.

“Commissions and network charges have increased by 13% from R1, 2-billion to R1, 4-billion in the current financial year. There is a direct correlation between these costs and the improvement in airline revenue. Electronic data costs decreased by 11%, primarily due to reduced network costs following the sale of the Galileo reservation/distribution system.”

“Operating costs over the past five years have remained well contained compared with the significant increases in fuel and regulatory costs,” said SAA Chief Financial Officer, Wolf Meyer.

SAA CEO,Monwabisi Kalawe concluded by saying: “We are confident that we will be able to turn this business around. We have the Long Term Turnaround Strategy in place to make certain that we secure survival as a commercial airline while quickly focusing on the successes that we are beginning to realize.”

Anthony A Juma is the Editor and Director Commercial and Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Business Aviation News On Airlines Operating Scheduled and Non-Scheduled Flights Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/flight-news.html

Anthony A Juma is the Editor and Director Commercial and Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Business Aviation News On Airlines Operating Scheduled and Non-Scheduled Flights Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/flight-news.html

Author Bio: Anthony A Juma is the Editor and Director Commercial and Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Business Aviation News On Airlines Operating Scheduled and Non-Scheduled Flights Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/flight-news.html

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