HILKA BIRNS / CAPE TOWN
South African carrier starts talks with alliances on membership but three years of profits needed before privatisation
South African Airways (SAA) has made a profit of R553 million ($5.7 million) for the last financial year, thanks to a 26% increase in revenue. This puts SAA in a stronger position as it starts to talk to the large airline alliances about possible membership.
The profit was achieved despite difficult market conditions and the R1.4 billion lease costs of the airline's Boeing 737-200s and -800s. Passenger revenue climbed by R2.3 billion because of improved yields resulting from fare increases and better revenue management, and the positive impact of the devaluation of the rand.
Operating costs increased 19% to R15 billion as a result of higher fuel costs, maintenance material and aircraft leases. Costs climbed despite last year's cost-cutting programme.
Chief executive André Viljoen will be meeting the heads of the Air France/Delta Air Lines-led SkyTeam alliance next week to discuss possible membership. SAA "will ultimately have to join one of the major alliances", says chief financial officer Richard Forson. The uncertain future of many of the major US carriers means that "there is no deadline at the moment" for alliance membership, he adds.
Further off still is privatisation of the carrier. "The Swissair buyback affected the privatisation programme," admits Forson, referring to the 20% stake in SAA which its parent company, state-owned Transnet, had to buy back after Swissair's collapse last year. Forson believes SAA should not privatise until it has recorded at least three years of profits, although he points out that the final decision "is entirely in government hands".
Source: Flight International
