South African Airways Reports R354 Million Net Loss for Fiscal Year 2023/24: What New Updates You Need To Know

South African Airways (SAA) has reported a loss of R354 million ($20 million) for the 2023-24 financial year. This follows a net profit of R252-million for the airline’s previous financial year (2022-23), its first in more than a decade.

Although SAA posted a respectable 23% increase in turnover during this time, the airline’s financials have been hit hard by escalating operational costs, economic constraints from outside forces and set back in its fleet growth strategy goals.

The airline’s top management, led by its CEO, John Lamola, has been quite honest about the cause of the loss, blaming a cocktail of currency volatility, sky-rocketing fuel prices, and rising leasing charges. In addition, the delivery of new jets was late, which prevented the airline from earning more, and it was losing out competition-wise in the global airlines market.

The volatility of the rand is one of the major reasons the airline is expected to run at a loss in 2023-24. SAA revealed that it had also bitten the bullet in terms of forex rates, suffering a R415 million forex loss due to a rand depreciation. This volatility increased the airline’s cost of importing goods and services and impacted its bottom-line.

Apart from continued turbulence in currency markets the airline’s jet fuel costs spiked during the year by growing R1. 3 billion to R1. 9 billion. This hike also mirrors the broader upward trajectory of worldwide fuel prices that have been making things difficult for airlines internationally. Fuel is among the biggest cost items for airlines, and such sharp increases put a squeeze on profitability.

The leasing expenses were also a factor in the financial struggles of the carrier, who reported a 30% increase in their leasing costs for the period. SAA is still rebuilding its fleet after exiting business rescue, making leasing aircraft an important of its strategy to fill its network. But the increased leasing costs added to the airline’s woes.

The Implications of Slowing Fleet Growth and the Business Rescue Process

Further, the company’s loss was also attributed to the impact of aircraft delay, which affected its fleet expansion and its capacity to cater to growing demand in the global aviation industry.

Adopting new aeroplanes as part of the recovery plan is crucial in SAA’s turnaround strategy, and any delay in the delivery of new aeroplanes can have an impact on the airline’s financials performance. Fewer planes meant the national carrier couldn’t ramp up its operations at the same pace as increased revenue, and added little room for more routes or services.

The airline’s finances were also affected by the lingering effects of its business rescue process, which it did in 2019 after SAA experienced a crippling liquidity crisis.

How the airline was able to come out of business rescue in 2021 with a burden of long-term impact on its financial statements. During the 2023-24 financial year, auditors adjusted the approach to business rescue creditor obligations and the accounts required to be re-stated.

The reworking transformed what was a net profit of R71m disclosed in the first report into a loss of R354m. These changes were made to reflect the true state of the company’s finances post-business rescue.

The botched partial privatization and its fallout

An important setback to the airline’s recovery effort came in March 2024 when its proposed privatisation agreement with the Takatso Consortium collapsed.

The privatization was viewed as a critical step for SAA, which was betting that an injection from its strategic partner would stabilize the airline’s finances. The collapse of this privatization deal has meant SAA has had to rethink its business model and move more towards a model of self-sustainability.

The CEO, John Lamola admitted that the crash of the privatization deal meant a high degree of uncertainty for the airline.

But he struck an optimistic note about the future, saying the carrier’s efforts to clean up its governance, grow its fleet and improve customer service would lead to a long-term recovery. Notwithstanding the reverse, the leadership of SAA is optimistic that these internal measures will enable the airline to be stable and profitable in a relatively short space of time.

Strengthening Governance and Financial Transparency

In a bid to restore confidence in its finances, SAA has recently initiated an ‘audit health plan’ to address its financial reporting and governance practice.

This plan consists of steps to harmonize financial processes, improve the audit function of the airline, and coordinate with the independent auditors to make sure the company is able to meet all required filing deadlines. The airline has emphasised that it plans to track and has had enough of the valid and accurate financial statements.

Lamola said if anything, the airline had managed to conclude six successive audits over the last three years, which showed SAA’s willingness to implement strict audits. Such work is designed to improve the financial trust of the airline and to indicate it is on course to achieve future targets.

An Emphasis on Resilience and Recovery

In the long-term South African Airways continues to focus on their recovery and sustainability plan for the future. Although the airline still holds significant operational challenges, especially cost control lag and external economic dynamics, with SAA’s leadership determined to make a difference.

The airline has since shifted its attention towards fleet recovery, network growth and the support of a better customer experience overall. These are considered crucial to winning back market share and putting the airline on a path to long-term profitability.

Lamola said the airline’s board’s priority in its road towards recovery would be a commitment to better governance and financial accountability. Furthermore, SAA will refine its operational tactics, such as spending less and better managing its fleet, in order to maintain its competitiveness in a company environment which will only get tougher.

Conclusion: Path to Recovery for South African Airways

It is certainly turbulent times for South African Airways in the wake of business rescue.

For the year 2023-24, the loss has drawn attention to the continued financial woes, amid growing expenses and the scrapping of its plan for privatization. But with a renewed attention on governance, fleet modernisation and better customer service, SAA is looking to ride the storm with a view to returning to profitability.

How well the airline can steer through these challenges and regain investor confidence and maximise its operational efficiencies will determine its prospects in exiting this turbulent era in a stronger and more sustainable footing.

The ‘next few years will be critical to trajectory’ of South African Airways as it aims for a financially stable future and to rejuvenate its brand on the world stage of aviation.

The post South African Airways Reports R354 Million Net Loss for Fiscal Year 2023/24: What New Updates You Need To Know appeared first on Travel And Tour World.