SAA flies to R136m profit

[Gyro Nut]

Johannesburg - South African Airways (SAA) announced on Thursday that it has made a net profit of R136m in the first six months of its current financial year.

After restructuring charges of R56m the amount dropped to R80m, which is a significant improvement from the same time last year when the airline made a net loss of R575m in the corresponding period last year. The profit comes off revenue growth of 15% to R11bn from R9.6bn in the first six moths of 2006.
CE Khaya Ngqula attributed the turnaround to the "deep, fundamental" restructuring the company is going through, saying the results show the restructuring is starting to pay off.
SAA is involved in a restructuring programme that has seen it abandon the unprofitable Johannesburg - Paris route. "Thank God we closed the routes after the recent rugby world cup," said Ngqula.
"We carried more passengers to the world cup than anybody else."
A key element of the restructuring exercise was to ground the entire fleet of six costly Boeing 747-400 aircraft, which were used in the London route. The last flight of the leased jets was at the beginning of November.
Ngqula said leases for the aircraft, entered between 1998 and 2000, were structured to ensure lower lease rentals in the early stages with large increases towards the end of the lease period. As a result of that SAA was paying up to 60% higher than market fees for similar aircraft.
Said Ngqula: "We had to ground them (now) because it would have made no difference waiting for the expiry of the leases. It would have made no difference if we parked them."
He said the jets had a higher fuel cost base than newer aircraft.
As part of the restructuring, Ngqula said the airline has cancelled 32 sponsorship deals to remain with only five. Among the five remaining ones are official carrier of the national soccer team and the Nedbank Golf Challenge in Sun City.
"We are busy negotiating with SA Rugby for the sponsorship rights to all levels of rugby," said Ngqula. "It is the revenue associated with rugby supporters that we are eyeing."
Ngqula said the company social responsibility budget has been closed. "You can't give money to anybody else when you don't have money to look after yourself."
The company's target is to reach a profit margin of 7,5% by March 2009 and Ngqula said that was on track. A significant contributor to that would be cost cutting, mainly through retrenchments amounting to about 20% of staff and renegotiating of employment conditions, in which the company has already made a "significant progress". - Fin24

[MrBernoulli]

Any company, ****e or otherwise, can claim 'profits' when they have hacked away at infrastructure and personnel.

CE Khaya Ngqula attributed the turnaround to the "deep, fundamental" restructuring the company is going through, saying the results show the restructuring is starting to pay off.

Give it a year or so more and you will see the rot appearing again. Profits? It is merely an accounting 'smoke and mirrors' exercise.

[Avi8tor]

So i gave it R900mill and it made a profit of R134 mill? Even AV or JvJ would proud of that kind of accounting.

[JetNut]

net profit = income - costs

employees = costs...so get rid of employees and you reduce costs. Elementary my dear Watson! :}

[ZERO3L]

SAA tames unions, but will lose up to R3bn to restructuring
November 9, 2007
By AUDREY D’ANGELO
Johannesburg - Trade unions had agreed to forgo annual pay rises in the financial year to next March, and to the standardisation of working conditions across the board, averting the threat of a strike, Khaya Ngqula, SAA's chief executive, said yesterday.
But the airline will report a once-off net loss of R2 billion to R3 billion because of restructuring costs, including retrenchments.
Ngqula said the airline's revenue had already improved as a result of cost-saving measures that were part of its restructuring plan, in spite of soaring fuel costs.
The interim results showed an operating profit of R136 million. The airline reported a loss of R883 million in the last financial year.
This was a positive trend, although there was still a long way to go to return to profitability on a sustainable basis, in view of the volatile conditions faced by the industry.
The support of the unions, including the pilots' association, for the restructuring programme made the worst case scenario of shedding more than 2 000 jobs unnecessary, although some jobs would still have to be lost.
Ngqula said SAA was repositioning itself as a premium-brand airline, no longer competing with the low-cost airlines. And it would acquire more aircraft in the future.
Ngqula said revenue rose to R11 billion in the six months to September compared with R9.6 billion for the comparable previous-year period.
After operating costs, aircraft leases and depreciation and amortisation, earnings before interest and tax were R257 million against a loss of R575 million previously.
SAA had completed its two biggest restructuring initiatives - the grounding of its ageing fleet of Boeing 747-400s and consultations with labour on standardising and simplifying conditions of employment.
Grounding the Boeings would achieve savings of at least R600 million. Their lease costs had been up to 60 percent above current market rates because, after a payment holiday in the first year, they had escalated annually and ballooned for the final years.
Clive Else, the acting chief financial officer, estimated that about 1 000 jobs would still have to go to achieve the necessary savings. He said 900 applications for voluntary retrenchment had been received, which would hopefully make involuntary retrenchments unnecessary. But he warned that the voluntary applications might not all be granted if they came from staff with skills the airline could not afford to lose.
Human resources general manager Bhabhalazi Bulunga said he was delighted with the outcome of negotiations with the unions.

[RobinB]

Guys, guys - have you not read "African Economy 101" by R G Mugabe (B.A. MsC B Com and ********):rolleyes:

[Avi8tor]

South African Airways (SAA) announced on Thursday that it has made a net profit of R136m in the first six months of its current financial year.

The interim results showed an operating profit of R136 million
Now which was it, Operating or NETT?

Just to service the interest on R3 bill would be R300mil. So to pay the restucturing costs over a 5 yrs period SAA would need a REAL profit of over R900mill per annum. What a dead loss.

[PAXboy]

"Thank God we closed the routes after the recent rugby world cup," said Ngqula.
So ... God is running the company now? Does that mean that, when it goes wrong, it's not Ngqula's fault? :hmm:

[fly nice]

PAXboy


:D!

[TwinJock]

Grapevine is by no means dismissive of SAA’s genuine and painful efforts to restructure and make the airline profitable, and the first glimpses of its successes in this area were evident this week.

However, its optimistic update on its restructuring process came just days after government approved yet another injection of funds. SAA had asked for, and was granted, R744-million to take care of retrenchment costs.
Restructuring is so much easier when a company does not need to pay for it.


Economics 101 majoring in Airline Mismanagement - according to Khaya!! Profit my a:mad:e!:D

[Avi8tor]

Trust me, if I was under any illusion that it was real I would be a happy camper. Sadly we have seen it all before.

A new 'boy' takes over, then SAA makes a 'profit'. He gets a FAT performance bonus and then jumps ship. Then the taxpayer finds that the 'profit' has been made on the back of some dodgey aircraft 'ballon payment' scheme or sale of assets.

The government should have given the R744 mil to Novick and co for a few 777's. At least I would have got a real return on my investment.

[fluffyfan]

Yawn

:zzz:

[JetNut]

sour grapes, mate?

[Avi8tor]

sour grapes, mate?
About? The fact that SAA has misrepresented its financial position over a number of years? Nope, thats fact, not sour grapes.

[JetNut]

SAA has misrepresented its financial position over a number of years


Please forward me the independent auditor's report from which you base this conclusion. Once again, simply making unfounded/unproven statements only serves to verify your utter ignorance of the situation.

Maybe if you presented real facts (not stuff you've simply dreamed up) I could take you seriously.

[Avi8tor]

What colour is the sky in your world?

Are you saying that SAA didn't sell and lease back the 744 with balloon payments? Are u saying I made up the using of unflown ticket revenue to adjust the figures? Are you saying that the 738's dont have balloon payments? The fact that SAA has needed BILLIONS of tax payer ZAR's to stay afloat is a dream I had in the bath? And not to forget the old favorite the old 'revaluing assets' trick. I agree, all perfectly GAAP, but a real profit?

The odd years that SAA 'made a profit' there were always notes on the bottom of the financial reports.

SAA's accounting gymnastics is a matter of public record. Trust me, I am the 1st one that wants SAA to make a REAL profit.

[Jamex]

JetNut

Please forward me the independent auditor's report from which you base this conclusion. Once again, simply making unfounded/unproven statements only serves to verify your utter ignorance of the situation.

Are there independent auditors reports for SAA? Just asking.

[JetNut]

It's good to know that you are at least aware of the existence of GAAP principles. This is an evolved accounting process developed on the grounds of corporate governance, but alas, when you say "revaluing assets" to make a profit,I start to place doubt on your grasp of the concept.

Major companies in South Africa are compelled to reveal their accounting processes and figures in the public domain. That's why you have the privilege of actually viewing the "notes at the bottom of the financial reports".

The day that Middle Eastern airlines (which you profess to be doing such a sterling ethical job..) publish their financial reports in a public newspaper, is the day you may have the right to blow your highly opinionated horn w.r.t SAA.

[Goldfish Jack]

Here here Jetnut

Anyone can take any set of any figures and turn them around to show any set of numbers

Accounting 102 from Prof Mugabe

[JetNut]

Accounting 102 from Prof Mugabe


Frankly I'm a bit tired of hearing these kind of pathetic come backs containing absolutely no relevant information. It simply sounds like a lot of uninformed trash propogated by clueless individuals. What exactly is accounting 102 by Prof Mugabe?? (once again this only highlights your bigot tendencies and nothing else). If you read my previous post as well as what Avi8tor inadvertently mentioned...GAAP is an internationaly recognised and objective science. This is a major aspect of business in South Africa, as pioneered by our very own King II report. This is what then makes us different from the rest of the world. So, appreciate it. We could of had some Sheik's brother-in-law balancing the books at parastatals...now that's real smoke and mirrors.

Continuosly posting such drivle only confirms the rumour that there are some really stupid pilots out there, which then tends to undermine this proffession. It's no wonder an ATPL is not a recognised tertiary qualification (as it seems any moron can attain one)!!

[Avi8tor]

ATPL is not a recognized tertiary qualification (as it seems any moron can attain one)!!
You are making that plain for all to see. Be careful of calling people stupid when they don't agree with you. It says something about you, not them.

GAAP is just what it says Generally Accepted Accounting Practice. It is mearly a way of reporting what has happen, it in NO way proves that sound business principles were used. Most prudent CEO's would have made a provision for upcoming expenses (ie. balloon payments) NOT declared a profit and paid themselves a huge bonus.

If SAA was in any kind of financial shape, it wouldn't need BILIONS every year to keep going. Even in the 'profit' years it kept needing state money. Sadly 'the proof of the pudding is in the eating'.

P.S. Only listed or state enterprises are required to publish financial reports to the public.

[AirwayBlocker]

If I knew Jetnut had such a big red button I would have pushed it long ago. It has a really great effect.

Way to go Goldfish. Some people really should learn to chill out and find a sense of humour.

PS Jetnut, are you ones of those morons you refer to that has an ATPL?


It's no wonder an ATPL is not a recognised tertiary qualification (as it seems any moron can attain one)!!

[Jamex]

Way to go AirwayBlocker!! Agree totally with your last post. I would love for an independent auditing firm to look at SAA, especially doing a forensic audit. This wont happen anytime soon. Might uncover more than certain vested interests would want anyone to know. Avi8tor, thanks for taking time out to explain what GAAP actually means as it seems some people really did not know. Obviously certain people dont know about Generally Acceptable Accounting Practices and think this is an exact science with conclusive results. It is a part of corporate governance and is simply what it says, Generally Acceptable and not a rule book.

[JetNut]

I would love for an independent auditing firm to look at SAA


Yes, yes, please could someone audit the accounting practices of this company. Maybe then it will prove that pilot salaries have didly-squat to do with mass financial hemorrhaging. And prove once and for all that these superior beings (SAA pilots) have been right all along!

JameX...yes I agree GAAP is not a rule book, but: in the formulation of GAAP the accounting proffession followed the approach of identifying those practices that were material and could be applied generally. As a result, differences between accounting practices were actually limited.

Use it, don't use it :hmm:

[evanb]

A few points of correction, since SAA is a (Pty) Ltd it is subject to audit by an auditing firm registered with the SA Institute of Chatered Accountants. SAA's auditors are Deloitte's and the audit has never had any problems (according to SAICA).

International accounting standards are governed both by GAAP (Generally Accepted Accounting Practice) and IFRS (International Financial Reporting Standards). GAAP is more of an American concept and one which gives firms a little more flexibility in how they deal with certain things, ie. writing up expenses as capital expenditure, etc. Accounting practices in South Africa are considered amongst the highest and most credible in the world and are more in line with IFRS which is more rigorous than US GAAP. SAA is IFRS compliant, according to their auditors which mean that American style fishy accounting is unlikely.

[Avi8tor]

The point has been missed. Any accounting standard does not stop bad business. All it does is ensure the beans have been accounted for in an acceptable way.

It doesn't stop me refinancing B744's (selling them to a bank) with balloon payments. If the aircraft had been written down in the books, the money is 'profit on sale of assets'. That is quite rightly shown as profit. Then we have big clapping of hands, popping of corks and a huge bonus for all.

What has actually happened is the CEO has sold the furniture to keep going.

[ERASER]

I do believe that SAA finance is using GAAP as a accounting practice, also conforming to the PFMA (Public Finance Management Act). SAA and its subsidiaries are audited twice a year by external auditing companies. The SAA internal audit office actually comprise of staff (on contract) from an external auditing firm. The accounting and Human resources software believe to be SAP/R3, a very expensive but well know German financial and Human resources system.

This however does not stop creative accounting from taking place.

E

[evanb]

SAA does not use GAAP since it is no longer used in SA but use the standard set out by the SAICA which is IFRS! You are correct in that accounting standards won't stop dodgy business but rather make it more difficult. The dodgy accounting that people have been speaking about in this forum is not possible if the auditors do their job and follows the standards laid out in IFRS!