There have been a number of reports on SAA’s capitalisation. This statement aims to provide accurate information about the capitalisation from 1999 to 2008.
SAA has received a total investment of R11,18-billion from government.
The basis for this is given below.
In 1999 HSBC Bank undertook a review to determine SAA’s debt in line with the South African Airways Unallocable Debt Act.
HSBC determined that R4 057-billion be attributable to SAA, and of this amount, SAA assumed the debt obligation for R1-billion.
The balance was associated with the balance sheet on SAA’s incorporation in April 1999. By implication government contributed a net total of R3 057-billion prior to 1999.
In June 1999, TransÂnet sold a 20% interest in SAA to Swissair for R1,4-billion.
Transnet subsequently reacquired the 20% interest in November 2001 for R382-million.
SAA incurred losses of R13 148-billion in the years ended March 31 2003 and 2004 as a result of foreign exchange hedging losses (R9,8-billion) and impairment of aircraft assets (R3 348-billion).
Transnet’s hedging policy was for 70% of SAA’s capital expenditure in foreign currency to be hedged.
This policy was adopted when there was an expectation that the rand would lose value.
The decision to close the hedge book averted a far greater potential loss that would have resulted if action had not been taken as the currency strengthened from 2002.
To fund SAA’s hedging losses and asset write-offs, SAA received a R6 089-billion capital injection and an initial R4-billion compulsory convertible loan from Transnet of which only R2,4-billion was subsequently converted into equity in SAA.
The R1,6-billion balance of that loan was repaid to Transnet prior to its transfer to the department of public enterprises in 2006.
The R8 489-billion equity injected was thus the cash payment made to SAA during this time to fund the losses incurred.
More recent support for SAA has been based on restructuring and reshaping operations.
This included a transfer payment of R653-million (excluding VAT of R91-million) from government in the year to March 31 2008 to cover the costs of labour restructuring.
In addition SAA received a R1,3-billion and R1,56-billion guarantee in March and November 2007 respectively to maintain its solvency and meet costs associated with its restructuring programme related to the grounding of its B747-400 fleet.
SAA did use the guarantees to raise subordinated debt finance from the financial markets for which the airline must pay market- related interest rates.
The net amount of R653-million was an equity injection and the only cash payment during this more recent period.
SAA has implemented a restructuring programme since the beginning of the 2007/08 financial year and has been successful in reducing costs and restructuring its fleet and network of operations.
As a consequence it has been able to post a net profit of R123-million before restructuring costs for the year ending March 31 2008.