Sustaining profitability – SAA results for the year ending 31 March 2010

Highlights for the year:

* New Board and CEO appointed.

* Group pre-tax profit of R596-million (2008/9: R424-million) despite an exceptionally tough year for the aviation industry globally.

* Cash generated from operations increased significantly to R1,7-billion from a deficit of R1,8-billion in the previous year.v

* Hedging losses decline to R120-million from the previous year's R1 046-million.

* R1,5-billion equity injection from the Shareholder used to repay a R1,5-billion subordinated loan.

* Resolution of Airbus A320 agreement allowing for measured growth phase in fleet.

* On time performance of 85%.

* African routes remain most profitable market segment.

South African Airways (SAA) today released its financial results for the year ending 31 March 2010, reporting a Group profit before tax of R596-million (2008/9: R424-million). These results were achieved despite an exceptionally tough year for the aviation industry globally. The national carrier reported a bottom line profit of R581-million, a 45% improvement from the previous year's net profit of R402-million.

"The reporting period was exceptionally challenging for the aviation industry worldwide, with a large decline in passenger demand as a result of the continuing effects of the global economic crisis. We are most pleased that in comparison to many other airlines and despite the decline in passenger numbers, SAA reported positive financial results," said Ms Siza Mzimela, Chief Executive Officer of SAA.

During the reporting year, some 6,7-million (2008/9: 6,8-million) passenger flew SAA, representing a 2,4% decrease from the previous year. Domestic and international passenger numbers decreased by 6% and 5% respectively, while regional passenger numbers increased by 9%. Cargo tonnage also declined by 14% from 138 000 in 2008/9 to 119 000 in 2009/10.

Revenue and earnings

Total airline income declining by 15% to R22,3-billion (2008/09: R26,4-billion). This decline underlined the importance of SAA's determined approach to contain costs.

Costs

Operating costs declined from R24,4-billion in 2008/09 to R21-billion in 2009/10. The most significant contributors to the decline were fuel costs, which fell by R3,5-billion, and aircraft lease costs, which decreased by R643-million. Employee benefit expenses, consisting mainly of staff salaries, increased by 14% or R513-million.

Hedging

The significant improvements in hedging losses also contributed to the improved financial performance. During the reporting period, fair value movements and translation losses from hedging decreased to R601-million (2008/9: R1,6-billion) - a 62% decline from the prior year.

Cash

SAA's cash position improved considerably during the reporting year, with cash generated from operations increasing significantly from a deficit of R1,8-billion in 2008/09 to R1,7-billion in 2009/10. During the year, the airline repaid R1,2-billion in external loans. In addition, SAA issued share capital of R1,5-billion, which was used to repay much of the subordinated loan from government.

Operations

SAA's operations continued on the positive trajectory set in the previous year. On-time performance - the key measure of operational performance - improved. SAA breached the 80% level consistently and achieved an 85% on-time performance for the reporting period.

Subsidiaries

With the exception of South African Travel Centre (SATC), SAA's subsidiaries also reported positive results. Airchefs reported a profit before tax of R35,5-million, an improvement on the previous year's loss of R12,7-million. Mango achieved a profit before tax of R18,5-million, a 9% improvement on the prior year. SAA Technical recorded a profit before tax of R9,5-million, an improvement of R180-million from the previous year's loss of R171,2-million. For the first time since inception 14 year ago, SATC reported a loss of R1-million.

Outlook

Looking ahead, the national carrier has identified the following five primary objectives:

* Generate sustainable earnings

* Restore the balance sheet

* Provide a consistently high-quality service

* Become a performance-driven organisation

* Enhance corporate governance.

"We look to the future with cautious optimism. We will continue to work tirelessly to build an airline that is safe, environmentally and socially responsible, and sustainably profitable", said Ms Cheryl Carolus, Chairperson of SAA.