South African Airways reported a surprise profit for the year ending March 2009 due to fundamental restructuring, the airline said on Monday.
Net profit came in at R398-million against a net loss after restructuring costs of R1,085-billion previously, the airline added.
The current year net profit, however, did include a credit of R407-million attributable to the net reversal of the 2004 impairment of pre-delivery payments (PDPs) paid to Airbus on the A320 purchase, the airline explained.
”The PDPs were impaired at the time because the deal was thought to have been cancelled,” SAA said.
Agreement had since been reached with Airbus to reinstate the deal under more favourable terms, SAA said.
”SAA delivered a net profit for the year despite unprecedented fuel prices, associated hedging losses and the onset in the second half of the worst recession since 1929,” acting CEO Chris Smyth told the results presentation.
”You must be surprised just as we were surprised,” Smyth added.
Critically the airline posted a significant turnaround at operating level, recording an operating profit of R1,9-billion against a small operating loss of R72-million the previous financial year, he noted.
”The financial results were achieved despite the industry having entered into a cyclical downturn in mid 2008.
”This was partly as a result of the global economic downturn which affected all airlines, but also due to the oil price hitting a historic peak of $147 last year,” Smyth added.
He noted that airlines around the globe were hard hit, with IATA estimating that the industry would lose $15-billion in 2009.
Smyth said SAA had been fortunate to begin its restructuring in 2007.
”At the time the airline industry was at a buoyant high,” he said.
In the first phase of restructuring which had just ended, the focus had been largely on cutting costs and improved revenue generation, he added.
The next phase would focus on improving customer service, operational performance and ensuring the programme remained in place and was sustainable, he noted.
Smyth said restructuring initiatives had over-delivered at R2,5-billion against a target of R2,3-billion and contributed significantly to SAA’s surprise result.
Looking ahead, Smyth added that the airline was expected to break even for the 2009/10 period provided passenger and freight demands did not fall further, yields did not decline, the rand did not weaken and the fuel price did not rise.
”SAA is confident about its future despite the economic challenges that the world economic crisis continues to pose,” he said.
”We won’t need to ask the government for help if everything goes according to budget, he added.
Turning to SAA’s low cost airline Mango, Smyth said although it had not reported its results separately, it had had ”a good year”.
SAA currently employed 7 898 people, including international employees and when SAA’s subsidiaries were included, a total of 9 821 people were employed, he added.
He said the airline contributed to and supported government’s goals as its cargo sector allowed quick movement of critical and high value goods and it promoted SA as a destination.
”By virtue of our name, we sell brand South Africa,” Smyth stated.
The acting CEO noted that the airline had to prepare for the inevitable growth that would follow the present downturn.
Africa, he said, would remain SAA’s key operational focus for expansion. – Sapa