Highlights

Headline profit of R553 million (2001: loss of R998 million). This figure excludes the net derivative fair value gains - AC133.
Operating costs increased 19,3% to R14 984 million (2001: R12 564 million)
Increased revenue by 26,1%
Headline profit achieved notwithstanding substantial increase in lease costs of R1 357 million (2001: R777 million) as a result of the Boeing 737-800 and B737-200 programme
Net profit after taxation increased to R2 144 million (2001: R408 million). This figure includes the net derivative fair value gains - AC133
Revenue from passengers increased by 25,8% to R11 178 million (2001: R8 889 million)
Cargo revenue grew by 18,9% to R1 394 million (2001: R1 172 million)
Technical increased revenue by 54,6% to R532 million (2001: R344 million)
Bank balances and cash increased from R2 billion to R3,9 billion
Cashflow from operations increased from R389 million to R1,9 billion

For the purpose of full disclosure SAA continue to report results on the headline earnings format. As such headline earnings do not include the profit/losses made on the sale of aircraft and other assets but do include one off exceptional items.

This is how SAA achieved the above performance.
Revenue
SAA increased revenue 26,1% for the year under review despite continued difficult market conditions. The increase was mainly attributable to increased passenger revenue, cargo revenue and third party maintenance work performed in technical.
Passenger revenue increased 25,8% to R11 178 million (2001: R8 889 million). The increase is mainly due to an improvement in yields (resulting from fare increases and improved revenue management) and the positive impact of the devaluation of the Rand against major currencies.
SAA Cargo increased its revenue 18,9% to R1 394 million (2001: R1 172 million). The growth in revenue is mainly as a result of an increase in rates, which was offset by a decrease in tonnage flown. The devaluation of the Rand also had a positive effect on Cargo’s revenue.

Operating costs

Operating costs increased 19,3% to R14 984 million (2001: R12 564 million). The rise in operating costs was mainly attributable to higher fuel costs, maintenance material costs, aircraft lease costs and certain once off items. Approximately 51% of operating costs, excluding aircraft lease costs, are US$ denominated and were severely impacted by the Rand’s devaluation.
Higher operating costs have been offset by the positive effects of the cost management programme introduced last year. A 30-minute turn around time on domestic flights has been implemented to facilitate improved aircraft daily utilisation and generate savings on aircraft ownership costs of approximately R100 million per annum. The introduction of the “Bistro Bags” in economy class on domestic routes has eliminated more costly catering needs and generated savings of approximately R40 million for the year under review. In addition, the reduction in the use of consultants contributed a R243 million saving in costs.
Headline earnings

In the year under review, the headline earnings, before the net derivative fair value gain (AC133), have improved from a loss of R998 million in the prior year to a profit of R553 million. This was mainly attributable to the above-mentioned increase in revenue, improved operating cost management and income from other financial management programmes.

New fleet

The highlight of this financial year was the beginning of a 10-year modernisation programme of our fleet. The purchase of 41 new aircraft is the largest civil commercial procurement order undertaken in the history of South Africa.

These new Airbus aircraft will be able to carry containerised Cargo on our domestic, regional and long-haul services, adding to our existing strong income base.
Perfecting the Basics makes “cents”
“Last September, only days after the attacks on New York and Washington, the airline industry appeared to be headed for a nosedive.
“Over the past months, whilst everyone focused on the gloomy financial outlook for the airline industry, we quietly realigned our structures, improved our operations, improved our turn-around times, embarked on a programme to renew our fleet and concentrated on the services our customers expect. These are the key deliverables of our Strategy of Perfecting the Basics.
“Putting a strategy together is one thing, making it work is another. The success of our Perfecting the Basics Strategy was only because of the commitment and dedication of everyone at SAA.
“SAA must be more customer focussed with a culture of cost management to sustain profitability. As we push ahead to address the new realities that confronts our company, I am confident that SAA will defend the home skies, extend its wings to cover the entire African skies and other parts of the world,” says André Viljoen, SAA President and CEO.
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