South African Airways (SAA) posted a net profit before tax and restructuring charges of R136-million for the six months ended September 2007, after a period of massive losses, acting chief financial officer Clive Else said on Thursday.
Revenue rose to R11-billion from R9,6-billion, reflecting a 1,2% profit margin.
After deducting R56-million restructuring costs, the ”bottom line” was R80-million.
However, Else said the company is expected to report a net loss in March 2008 due to the flow-through of its restructuring costs, but sees this as part of one-off restructuring costs that will lead to ongoing savings and better financial prospects.
He said oil prices, currently at about $90 a barrel compared with an average $65 last year, and interest rates pose potential risks.
Energy costs made up R3,1-billion of total interim operating costs compared with R2,86-billion for 2006.
For the previous financial year, the company made a loss of R883-million.
”We are not here to tell you that we are closed as a business; we actually have firm foundations for the future,” said CEO Khaya Ngqula. ”It’s been very painful, it’s not been nice and we are hoping that this restructuring will carry us for the next five years.”
He said trade unions and staff had been very cooperative and pivotal in some of the changes.
The government gave SAA funds to help with the restructuring, but it was forced to close a R638-million gap.
Its board approved a restructuring programme in May this year with the aim of reducing its high operating cost base and achieving a 7,5% profit margin by 2009.
Restructuring measures have included grounding its fleet of Boeing 747-400s on November 1, which is expected to lead to a saving of R600-million in the coming 18 months.
”Ibhayi” was the last of the Boeing 747-400s to touch down when it completed its flight from Luanda to Johannesburg. The aircraft had been the first Boeing to land in Port Elizabeth.
Looking ahead, the company believes that when it purchases new aircraft, they will be technologically advanced and more efficient.
A freeze on salary increases, including management, will be in place this year and SAA’s Paris route was cut shortly after the Rugby World Cup. However, it has introduced new routes in Africa and to Munich.
It has also reduced the number of management levels from seven to three as part of its goal of reducing management head count by 30% — and is still in negotiation with employees over voluntary severance packages after it initially calculated that it would have to cut 2 232 people from a staff of 10 000.
SAA now believes that it might not have to let as many people go, due to support from labour for the restructuring, and said it plans to hold on to skilled staff and embark on programmes of reskilling.
SAA has also cut back significantly on its sponsorship and social responsibility budget. ”If you don’t have money to give to yourself, you don’t have money to give to anyone else,” said Ngqula.
The five sponsorships left out of the initial 37 are Bafana Bafana, the Proteas, the ATP worldwide and South African Tennis Association, the Million Dollar Golf Challenge and the SAA Open.
The airline plans to unbundle and establish seven standalone subsidiaries, while Air Chefs and Galileo will be sold. A post has been created for a new general manager responsible for mergers, acquisitions and disposals.
”Today we are not going to close this business,” Ngqula said. — Sapa