South African Airways (SAA) plans to significantly reduce its flights by 23% from the end of the year‚ 37% of which would be on domestic routes‚ 11% regional and 4% on international.
The initiative is part of a programme to remove loss-making routes and rationalise the airline’s network.
The flight reduction will be the outcome of the exiting of narrow body aircraft from the airline’s fleet‚ with one having already left and four more expected to leave by December 2017.
The last of the five excess wide-body aircraft will exit the fleet in October 2018.
These plans were revealed in a presentation by SAA executives submitted to Parliament’s standing committee on finance Wednesday.
The flight reduction is part of SAA’s plan to cut costs and limit its losses. According to the presentation‚ SAA made a loss of R1.4bn in the first quarter of the current financial year. But in an encouraging sign the airline made a profit for the first time in a long time of R19m profit in July compared with the budgeted loss of R207m. Income for the month was almost in line with budget.
SAA said progress was being made in cutting costs but finance costs are high‚ amounting to R468m in the four months to end-July compared with the R363m in the same period last year.
As well as stagnant revenue growth and increased finance costs SAA is facing intense competition from low cost carriers.
“Engagements with the lenders on the long term extension of the maturing debt are ongoing‚” SAA executives said.
“One of the lenders has indicated that they would like to engage on a payment plan.”
Part of SAA’s long-term turnaround plan is a R13bn capital injection by the state over the next three years. It already received a R2.2bn injection a few months ago when it was unable to repay a loan to Standard Chartered Bank.
Finance Minister Malusi Gigaba is expected to announce an equity injection when he tables the medium term budget policy statement in Parliament next month.
Source: TMG Digital.