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Most airlines worldwide have to battler fuel costs and competition, but few are impacted by currency changes like South African Airways has been in the past year.
South African Airways Ltd., the continent’s biggest carrier, said it had an operating loss of 991 million rand ($88.9 million) in the 12 months through March because of unprofitable routes and a weaker rand.
The state-owned carrier was most affected by currency changes, according to Chief Financial Officer Wolf Meyer. Higher fuel costs and competition from Middle East carriers affected SAA’s long-haul routes, all of which were unprofitable, the company said.
“Two big factors are the high fuel price and the weakening of the rand,” Meyer told reporters in Johannesburg. “The weakening rand spoiled the party for us while we were cutting costs.”
The declining South African currency will continue to have a “severe” impact in the year through March 2014, he said. The rand has slumped 23 percent against the dollar since the beginning of last year, the worst performer of 16 major currencies tracked by Bloomberg.
SAA plans to cut costs, lease more fuel-efficient aircraft and focus on more profitable routes in order to recover financially. The airline continues to need “billions” of rand from the government and won’t break even for four to five years, Chief Executive Officer Monwabisi Kalawe said in an interview last month.
Negotiations with the state about a capital injection is one of SAA’s biggest priorities for 2014, Kalawe said today. The government is “still in negotiations with National Treasury about the support,” Public Enterprises Minister Malusi Gigaba said.
The 991 million rand operating loss compared with 1.25 billion rand in fiscal 2012, the company said. Full-year sales increased to 27.1 billion rand from 23.9 billion rand.
With assistance from Kari Lundgren in London. Editors: John Bowker, David Risser.
To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at firstname.lastname@example.org. To contact the editor responsible for this story: Simon Thiel at email@example.com.