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Saturday / 9 November 2024
HomeFeaturesSouth African Airways profit called into question

South African Airways profit called into question

South African Airways (SAA), the state-owned entity that went into voluntary business rescue in 2021, managed to turn a profit for the 2023 business year but has since come under fire over a lack of transparency as to how it managed to achieve this turnaround.

At the beginning of June, the National Treasury reported that the airline had accomplished a profit of R500 million for the business year that ended on 31 March 2023, and declared that it was no longer technically insolvent, according to Daily Investor.

Profitability

South African Airways reported profit mostly consisted of consolidations totaling R505 million, compared to a budgeted loss of R740 million.

However, SAA itself only turned a profit of R31 million, while its domestic subsidiary Mango posted a loss of R66 million, and Air Chefs, which supplies the food and beverages for the aircraft, lost R12.6 million.

SAA Technical, on the other hand, recorded the largest profit of the group with a positive return of R84.4 million, and the National Treasury now claims that the airline has a net equity value of R670 million as of 2023.

When The Citizen contacted the Treasury asking for a breakdown of the R505 million worth of consolidated entries and how the airline was able to turn a profit, they were not given an answer but instead told to contact SAA and the Department of Public Enterprises.

The flight operator has not published its annual financial statements for the last five years, but told reporters to wait for its next financial statement, which is expected to come out later this year, said Daily Investor.

SAA is about to make a big expansion

The uncertainty regarding SAA’s finances comes at a time when the business is laying the groundwork for a big expansion.

South African Airways came out of business rescue in 2021, having been inoperable for over a year as a result of the Covid-19 pandemic.

Since September 2021, the airline has been functioning on a lower scale with a limited fleet of eight aircraft that only conduct local and regional flights, but the company recently announced that it would be expanding operations to once again include international destinations.

The business is currently looking to procure six new Airbuses – a plan that has been approved by both the Minister of Finance and the Minister of Public Enterprises.

“The aircraft will be delivered before the end of this calendar year, and the planes include a wide-body aircraft as well as five narrow-body aircraft – all of them Airbus equipment,” said John Lamola, the interim CEO at SAA.

All six aircraft will be taken out on a 36-month lease, and the first units are expected to come online by September 2023.

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